Claiming on Your Investment Property at Tax Time

Claiming on Your Investment Property at Tax Time

Tax time can be confusing for many property investors, but getting sorted is simply a matter of following some basic rules and getting the right advice.

To help clear up the confusion, here are some steps you can take in order to maximise the tax depreciation benefits available to you.

1. Find out what you can claim

As an investor, you’re entitled to claim a variety of expense-related deductions, including property management fees, rates, interest, repairs and maintenance, and depreciation. However, in order to take advantage of your property’s depreciation, you’ll need a tax depreciation schedule.

A typical schedule will outline all the capital works deductions available (structural items such as walls, roofs, floors, windows and doors) as well as any removable plant and equipment items in the property, such as appliances, carpets and blinds. On average, an investor can usually expect to claim between $5000 and $10,000 in depreciation deductions in the first financial year alone.

2. Make sure you get it right for your particular property

One of the main reasons investors fail to maximise depreciation is because they mistakenly believe their property is too old to be worth claiming. Although the age of a property can affect what capital works deductions are available, plant and equipment items can still save you a bundle at tax time, regardless of the age of your property.

3. Claim depreciation deductions when working from home

Do you operate a business from your home? If so, you may be entitled to claim depreciation for the portion of the property and any plant and equipment assets used for the purposes of producing an income. If you have any questions about what items qualify for depreciation, a qualified quantity surveyor can help.

4. Get deductions for partial financial years

Many investors who’ve purchased a property in the lead-up to the end of the financial year wait until the following year to claim depreciation. Instead of waiting, a tax depreciation schedule can provide deductions for partial financial years, helping to boost your cash flow – a welcome bonus if you’ve outlayed a large amount of money to secure a property.

5. Make sure your tax return is correct

For better or worse, many investors don’t have adequate knowledge of depreciation to calculate deductions themselves. One error easily made is to incorrectly classify assets as capital works rather than as plant and equipment, and vice versa. As the rate of depreciation for plant and equipment assets is usually a lot higher than capital works (which all depreciate at 2.5% over 40 years), classifying a plant and equipment asset incorrectly can negatively impact your deductions.

6. If you don’t know, ask questions

If you’re unsure about what you can claim, it’s always a good idea to ask a qualified quantity surveyor what depreciation is available for your property. When choosing a quantity surveyor, be sure to ask whether the schedule will include a site inspection of your property. Because no two depreciation schedules are the same, it’s important to get value for the money you spend on the report.

7. Go to the right people to get advice

Under Tax Ruling 97/25, quantity surveyors are recognised as one of a few select professionals who specialise in providing property depreciation schedules. That said, not all quantity surveyors specialise in building depreciation. Ask your accountant to recommend a quantity surveyor who specialises in property depreciation for advice.
As an investor, maximising your depreciation can help maximise the return on your investment. Since most reputable quantity surveyors offer a money-back guarantee on the value of their services, it pays to contact an experienced quantity surveyor and get their advice.

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