Can you make the best of your investment property tax deductions? Get professional help if you need to.
One of the most appealing aspects of owning an investment property in Australia is that its depreciation becomes a major tax deduction. So as the property gets older, you are able to claim against wear and tear, even if the property has been increasing in value.
Property depreciation is applicable to any type of investment property that is used to produce an income. It may be that the property is rented out for housing or as a business premises, or the owner may be using it in some other way to generate money.
It does not apply to a property where you live fulltime. However, according to media reports, there could be up to 80 percent of property investors who are not exploiting their property depreciation deductions fully. So if you’re still busy with your tax returns make sure you make the most of your investment property tax deduction.
Depreciation on Old Properties
There is a common misconception that depreciation can only be deducted if the property is new and/or where building materials are likely to degrade or deteriorate more rapidly than normal. But in fact old properties also qualify for depreciation claims, although it is true that amounts will be less than those claimed on new properties. An accountant or tax consultant will be able to advise what deductions are relevant, and just how much may be claimed.
Renovations are also relevant especially since there are opportunities to claim property depreciation both before and after renovations are carried out. Obviously you are able to claim on new items and materials, for example new flooring or window frames, built-in cupboards or sanitary ware (including bathroom suites) that has been replaced. But what many people do not realize is that the old items – the old flooring or frames, cupboards, baths, basins and toilets – potentially form an additional tax deduction.
Role of Quantity Surveyors in Property Depreciations Claims
Since quantity surveyors are the professionals who estimate costs of construction, they can also be extremely helpful in terms of preparing depreciation schedules for tax deductions, guiding the accountant in terms of accurate costs. And it doesn’t have to be a quantity surveyor who was involved in the original build. These people are trained to identify what you can claim virtually by visiting the property concerned. Ultimately they will consider the property’s condition and by estimating costs and wear and tear, will be able to then estimate what reasonably tax deductions can be made.
Thereafter an accountant will be able to make the necessary adjustments to the figures claimed. The property owner will only need an updated quantity surveyor’s report if renovations or extensions are carried out some time after the initial report.
Before consulting with a quantity surveyor for your tax return, discuss the idea with your accountant or specialist tax consultant to ensure you are on the same page. If you have not maximized your property depreciation claims, he or she will be able to make amendments to tax deduction figures made in the previous two years. You may be surprised at just how much you can legally claim.
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