Claiming depreciation on an investment property.
There are many reasons why an investment property can be beneficial. Some people choose to buy an investment property for additional income, whereas others do so for the taxable benefits. But how can spending hundreds of thousands on a property be beneficial for taxes? Basically all expenses that go along with owning a rental property can be claimed on tax such as loan interest, rates, rental management fees and insurance. In addition to this, investors can claim tax depreciation which allows them to claim back money from their original investment, i.e. they don’t have to spend in order to claim.
What is Tax Depreciation?
Tax depreciation is a tax break that allows investors to offset their investment property’s decline in value from their taxable income. As buildings get older, the structure and items within it tend to deteriorate and decline in value, Australian law allows owners of revenue making properties to claim the decline in value back on their taxable income. Deductions can be claimed on the decline in value of the building’s structure and items permanently fixed to the property including equipment and plant assets such as dishwashers, ovens, blinds and carpets.
Not only does it help you pay less tax, it’s also a “non-cash deduction”, which means that you don’t have to spend money to claim it. The deductions come out of the initial payment of the property. It’s a huge perk for those who cross tax thresholds, enabling them to claim back thousands each financial year.
How do I claim Depreciation?
Claiming depreciation on your rental property involves specific knowledge, calculations and paperwork, so it’s best to work with your accountant and a qualified quantity surveyor to ensure you maximise your deductions and avoid tax evasion.
A quantity surveyor will find the maximum value of deprecation claimable for your property and provide a report for you to take to your accountant, to complete a depreciation schedule. Even though depreciation schedules are already an excellent investment, they are also claimable on tax, so it’s savings all around!
Why do I need a quantity surveyor?
A quantity surveyor is one of the few professional groups recognised by the ATO as appropriately qualified to accurately assess and report on construction costs and depreciable values. Your accountant can use the information provided by a quantity surveyor to claim tax depreciation on your investment property in the years to come.
Just as a little disclaimer, although we’re a Real Estate agency made up of staff who are experts in property, many of whom have investments of their own, taxation law is not our expertise, the advice above is general by nature. To get a better understanding on your own circumstances we’d encourage you to find further information at www.ato.gov.au or speak with your accountant. If you’re looking for someone that can help Clark NextRE is partnered with one of the best in the industry ‘BMT Tax Depreciation‘ so give them a call to arrange your claim 1300 728 72
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