It’s the start of a brand New Year and many of your investor clients will be formulating their annual New Years resolutions.
Investors often think about the ways they can reduce the costs of owning an investment property and wonder how they could boost the cash flow they earn. However when they do so, the deductions they can claim via depreciation are not always at the top of their list when it comes to saving money.
Around 80 per cent of investors still do not maximise the depreciation deductions available from their investment property, so this is a very good reason why you should encourage your client to speak with a specialist Quantity Surveyor to discuss the benefits of a tax depreciation schedule.
Organising a tax depreciation schedule as a part of their resolutions list for the year can be a great way for clients to improve their cash flow and even help them to achieve other goals such as budgeting for necessary repairs and maintenance, saving for additional properties or even paying down loans faster.
To help you assist your clients, we’ve put together four great reasons why investors should think about arranging a depreciation schedule today.
- Claim an average of $5,000 to $10,000 in the first year
Property depreciation is a non-cash deduction which can be claimed due to the gradual wear and tear of both the building structure and the plant and equipment items contained within the property.
On average, investors can claim between $5,000 and $10,000 in deductions within the first full financial year alone. The Australian Taxation Office allows investors to claim depreciation on the building structure over the effective life of the property (forty years) and deductions for plant and equipment assets based on their individual effective life.
By claiming property depreciation, investors are essentially reducing their taxable income and therefore may benefit by receiving more in their annual tax return or avoiding having to pay additional taxes.
- Every property investor can benefit from a depreciation schedule
Some investors think that because their investment property is old, they won’t benefit from claiming depreciation. This is untrue. Both new and old properties will attract depreciation deductions for their owners.
Depreciation deductions can be claimed for all types of investment properties including residential, commercial, industrial, retail, manufacturing and hotel and tourism accommodation.
- Adjust the previous two years tax returns
If you haven’t been claiming or maximising depreciation for your investment property, the previous two years tax returns can be adjusted and claimed back.
- The fee is 100 per cent tax deductible
Although there is a cost involved in arranging a depreciation schedule, the fee is 100 per cent tax deductible.
Investors who arrange their schedule prior to the 30th of June each year can claim the fee back in the same year, while investors who arrange and pay their schedule in the new financial year can claim in the following year.
This is all the more reason why investors should resolve to arrange their schedule in the lead up to a financial year rather than wait until tax time.
Property professionals who would like more information on how their investor clients can benefit from a depreciation claim or who would like an estimate of the deductions a new owner can claim from any property can speak with one of our expert staff on 1300 728 726.
Article provided by BMT Tax Depreciation.
Bradley Beer (B. Con. Mgt, AAIQS, MRICS, AVAA) is the Chief Executive Officer of BMT Tax Depreciation.
Please contact 1300 728 726 or visit www.bmtqs.com.au for an Australia-wide service.