Property investors can claim thousands of extra dollars on a property by maximising depreciation deductions.
According to the Managing Director of BMT Tax Depreciation, Bradley Beer, research suggests 80% of property owners are missing out on thousands of dollars in property depreciation deductions, which can mean the difference between turning a negative cash flow investment into a positively geared asset.
“When looking at new apartments, an investor can generally claim an average of $12,500 in depreciation deductions in the first full year,” said Bradley.
This is no small amount, so it is important for an investor to understand what property depreciation is and how it can benefit them.
Depreciation is a non-cash deduction that the Australian Taxation Office (ATO) allows the owner of an investment property to claim as a deduction due to the wear and tear of a building structure and its fixtures.
It is described as a non-cash deduction because the investor does not need to spend any money during the financial year to be eligible to claim it, unlike council rates, interest and strata fees for example.
“All investment property owners can claim depreciation, however higher depreciation deductions are usually available on newer properties.
In some states, unit developments with common areas also have higher deductions than a house purchased for the same price,” said Bradley.
Owners of new properties are eligible to claim the full deduction on the entire cost of the building structure over forty years.
There is also a deduction available for the fixtures and fittings contained within the property including stoves, carpet and blinds.
“Including removable fixed assets can substantially increase the depreciation deductions available for a property investor,” said Bradley.
Apartments generally contain more depreciable fixtures and fittings. In newer apartments these fixtures will have a higher value, resulting in more depreciation being available.
Some of the common property areas and assets within a development which may increase deductions in some states include driveways, swimming pools and pumps, fire protection equipment and lifts.
It is recommended to contact a Quantity Surveyor, such as BMT Tax Depreciation, to compile a tax depreciation schedule. B
MT Tax Depreciation will perform a site inspection and take photos of all plant and equipment to ensure no depreciable asset is missed and your deductions are maximised.