It’s tax time! Join David as he sits down with Blake Russell from BMT Tax Depreciation to discuss how landlords can claim tax via a tax depreciation report on their investment property. Blake takes us through a number of FAQs about tax depreciation on investment properties:
What is property depreciation?
Depreciation is the natural wear and tear of property and assets over time. Property investors can claim depreciation on their rental property as a tax deduction.
Capital works deductions allow investors to claim depreciation on the property’s structure and fixed assets. For examples, walls, doors, windows and basins.
While plant and equipment depreciation can be claimed on easily removable and mechanical assets. Some plant and equipment assets include floor coverings, furniture, light fittings and air-conditioning units.
In basic terms what is a tax depreciation schedule and what are they used for and why should a property investor get one?
To claim depreciation deductions to their full potential, an investor needs a tax depreciation schedule.
This schedule outlines all depreciation deductions available for the lifetime of the property (up to forty years). An accountant uses the schedule to determine the owner’s depreciation deductions each financial year.
How much is the average property investor able to claim back when using a tax depreciation schedule?
The average first full financial year claim found by BMT Tax Depreciation is over $8,000.
But it’s important to remember that there are many contributing factors that determines how much depreciation an investor can claim when using a tax depreciation schedule. Just some include the property’s type, age and whether it’s brand-new or second-hand.
Are these schedules only for properties which have been renovated or can they be used on older properties?
A tax depreciation schedule can be used for any type of property – both residential and commercial, new and old, renovated and non-renovated.
How often should a schedule be done and how long are they applicable for?
A tax depreciation schedule prepared by a specialist quantity surveyor lasts the lifetime of the property. This means it only needs to be completed once.
But if an improvement has been made, like a renovation or major structural repair, the schedule provider can update the existing schedule for a small fee.
If the property investor has a renovated property, but it was renovated by the previous owner to the property and they have purchased it in that condition, are they able to still claim depreciation?
The depreciation they can and can’t claim depends on the nature of the renovation.
If the renovation took place anytime in the previous forty-years, they can claim the structural component of the renovation. Some examples of structural renovations include installing interior or exterior walls, staircases and tiles.
However, the new owner won’t be able to claim the plant and equipment assets installed from a renovation completed by the previous owner. This is because these assets will be impacted by the 2017 legislation changes.
These changes essentially mean that investors can’t claim depreciation on ‘second-hand’ or ‘previously used’ plant and equipment assets. Including those installed during a renovation.
To get in touch with the BMT Tax Depreciation team you can ask your WWRE Property Manager or contact them here:
Phone: 1300 728 726
Email: [email protected]
Fax: 1300 728 721
Website: https://www.bmtqs.
