4 Tips for New Property Investors to Capitalize on Depreciation Deductions


Every financial year owners of investment properties are required by law to file their annual income tax returns. Quantity surveyors help property investors to claim a depreciation of their property --be it old or new-- against their taxable income. Notably, the Australian Taxation Office (ATO) requires that individuals who purchase property for income-generating activities should be entitled to some form of depreciation deduction. Here are some top tips to help new property investors benefit from depreciation deductions.

 Allowances -- In Australia, depreciation is recognized in the building, plant, or equipment category. Building allowance refers to the "brick and mortar" costs of bringing up the building. The plant and equipment allowance is the value of all the depreciating items in the construction including washing machines, carpets, and refrigerators. Therefore, the total of property depreciation is the combination of the two categories of allowances pegged against an investor's quantifiable income.

Depreciation Schedule -- A quantity surveyor will visit your property for assessment to prepare a tax depreciation schedule. The reason for a program is that it is hard to ascertain the real cost of a building unless a quantity surveyor makes such a determination by providing actual figures. The schedule will help your accountant to make a depreciation claim on your behalf. Note that since March 2010, it is a requirement that a quantity surveyor who produces a schedule should be a registered tax agent besides being certified by the Australian Institute of Quantity Surveyors (AIQS).

Site Inspection -- Before a depreciation schedule is developed, a quantity surveyor will visit your property to determine the cost of all plant and equipment. Also, they will use their knowledge to calculate the value of your investment property. All the information is meticulously recorded as evidence. In most cases, the surveyor might take photographs as secondary evidence to be included in the report. It is the information gathered from the site inspection that informs the depreciation schedule.  

Capital Improvements -- Some property owners already have depreciation schedules, especially if they acquired the property a while back. However, if you make any repairs or maintenance to your property such as plumbing and installation of new flooring, you are required to update your schedule to reap more benefits. For instance, if repairs were conducted this year, updating your depreciation schedule is supposed to entitle you to 100% depreciation deductions in the same financial year. However, the improvements should not change the state of the building significantly compared to the condition at the time of purchase. Capital improvements will be categorized under another tax deduction bracket.


23 August 2017

Financial Planning: Everything You Need to Know

Hello, my name is David and this is my new money blog. My old grandpa always used to tell me to look after my money because the bank wouldn't do it for me. I didn't believe him. But after leaving school and getting a job, I realised that as an adult, I would need to look after my own finances. I had a look at the different savings and investment options out there, but to be honest, they just made me confused. In the end, I called up a financial advisor who helped me to plan everything out and to find the best way for me to save and invest money.