WHAT IS PROPERTY DEPRECIATION?
The Tax Office states that if you are the owner of an investment property, you are eligible to claim back two types of allowances on your property: depreciation on Plant and Equipment and depreciation on Building Allowance for residential properties constructed after 1985.
WHY GET A TAX DEPRECIATION SCHEDULE?
A depreciation schedule assists you in paying less tax. A depreciation schedule will give you a year on year figure that you can claim, effectively reducing your taxable income.
CAN MY ACCOUNTANT PREPARE THE SCHEDULE?
An accountant may assist, however, if your residential property was built after 1985 your accountant is not allowed to estimate the construction costs. Quantity surveyors have been indentified by the Australian Tax Office as being qualified to make the appropriate estimate on construction costs, if these costs are not known.
CAN I CLAIM RENOVATIONS DONE BY A PREVIOUS OWNER?
Renovations done prior to buying a property are still eligible to be claimed for depreciation. Depreciation is based on the age of the property and the age of the fixtures and fitting. If the property has been updated in anyway over time, this will be depreciated accordingly.
DO I NEED RECEIPTS ON RENOVATIONS I HAVE DONE?
You do not need receipts but if you do know how much was spent on a renovation then you are obliged to let us know. If the previous owner completed the renovations or if you do not know what was spent on any part of your own renovations, a quantity surveyor is qualified to make an estimation.
WILL YOU NEED TO INSPECT MY PROPERTY?
There are two ways to go about getting a depreciation schedule done.
You can do the self assessment option where you follow a checklist and describe your property for the quantity surveyor. You can provide photos, floor plans, contracts if you have them and the report will be done based on the information you have provided plus our own searches.
Alternatively you can do it via the full inspection option where we liaise with you, your property manager or your tenants directly and we go to the property and obtain all of the information required.
IS MY PROPERTY TOO OLD?
If your residential property was built after 16th September 1987 you will be able to claim both Building Allowance and Plant and Equipment.
If your property was built prior to this date you can only claim depreciation on Plant and Equipment (ie. carpets, blinds, ovens, etc)
If renovations have been done on older properties then aspects of Plant and Equipment will be brought up to date, therefore making it worthwhile to get a depreciation schedule done.
I DIDN'T KNOW ABOUT DEPRECIATION WHEN I FIRST BOUGHT MY INVESTMENT PROPERTY. IS IT TOO LATE?
Your accountant can amend your previous tax returns up to two years back. There are some exemptions so please clarify with your accountant or the Australian Tax Office. We will begin your depreciation schedule from the first year of lease under your ownership.
NOW THAT I HAVE MY REPORT, DO I HAVE TO DO ANYTHING DIFFERENT AT TAX TIME EACH YEAR?
Once the report has been done you literally hand it over to your accountant and they will use it year on year for your tax return.