With the 2016-2017 financial year recently coming to an end, property investors may assume that they have missed their opportunity to organise a tax depreciation schedule and make a depreciation claim.

Research suggests around 80 per cent of property investors simply don’t claim because they are unaware of depreciation, they don’t know the rules or they don’t realise they’re eligible.

Legislation enforced by the Australian Taxation Office (ATO) allows investors to claim depreciation deductions on any income producing property for the wear and tear that occurs over time to the buildings structure (capital works deductions) and the plant and equipment assets contained.

Both new and older properties attract depreciation. Although the ATO restrict owners of older residential properties on claiming capital works for buildings in which construction commenced prior to the 15th of September 1987, depreciation of plant and equipment can be claimed for most buildings*. Property owners could also be entitled to claim deductions for any recent renovations or updates made.

A specialist Quantity Surveyor can prepare a tax depreciation schedule at any time of year. This schedule will begin from the property’s settlement date and outline depreciation deductions over the entire depreciable life of that property (forty years).

If an investor has not previously claimed or maximised the depreciation deductions available from their investment property they can go back and amend two previous tax returns.

*Under proposed changes to legislation, investors who exchange contracts on a second hand residential property after 7:30pm on 9th May 2017 will no longer be able to claim depreciation on plant and equipment assets. Investors who purchase a new property will be able to continue to claim these items as they were previously. We are currently speaking with government to further understand the intricacies relating to the proposed changes. To learn more simply visit www.bmtqs.com.au/budget-2017.

Investors who would like more information can contact one of the expert staff at BMT Tax Depreciation on 1300 728 726.

Article provided by BMT Tax Depreciation.

Bradley Beer (B. Con. Mgt, AAIQS, MRICSM, 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.

It’s easy to see Australians have a passion for property renovation. All you need to do is switch on the television and you’ll find evidence in the number of home improvement shows dominating our screens.

A large number of property investors complete additions or alterations to their investment property each year, yet many of these investors are unaware how these renovations will affect the deductions they can claim.

Below are five must know facts for property investors to help them understand property depreciation and ensure the maximum deductions are claimed, particularly when a renovation is involved.

1. Claim depreciation for older properties

One common misconception investors have is that they cannot claim depreciation on older properties. This arises due to limitations the Australian Taxation Office (ATO) place on eligibility for capital works deductions (depreciation for structural components of a property).  ATO legislation advises that owners of residential properties in which construction commenced prior to the 15^th of September 1987 cannot claim capital works deductions. However, depreciation of plant and equipment is not limited by age. It is the condition and quality of each item that contributes to the depreciable amount. Therefore, owners of older properties can claim depreciation.

2. Claim depreciation for renovations completed by a previous owner

Often when an investor purchases an older property, at some stage since the building’s original construction, renovation work may have been completed.

Although the ATO restricts property owners from claiming capital works deductions for properties constructed prior to the 15th of September 1987, they can claim capital works for renovations completed within the legislated dates, even if the work was completed by a previous owner.

Quantity Surveyors will discover any previous renovations, even less obvious ones like new plumbing or electrical wiring, during a site inspection of the property.

3. Get a depreciation schedule prior to renovation

Renovations can provide deductions over and above those received during a normal depreciation claim. This is because the owner can claim a deduction for any depreciable assets removed and disposed of during a renovation. This process, called ‘scrapping’, allows investors to claim the remaining depreciable value for assets removed as a deduction in the year the item is scrapped.

To be eligible the property must be income producing before the renovation takes place. A site inspection and tax depreciation schedule should also be completed before any items are removed and work begins to allow the Quantity Surveyor to take photos and value the items contained within the property.

4. Install assets that maximise future deductions

Selecting which assets to replace during a renovation can make a difference to future deductions. This is because each asset’s depreciable value is calculated based on its individual effective life.

For example, deductions available in the first full year depreciation claim for carpets, floating timber floors and tiles differ. If an owner has decided to install new flooring to the value of $2,000, but is unsure which flooring type to install, the deductions that become available afterwards may assist their decision. By choosing to install $2,000 in carpets rather than floating timber or tiles, the owner will be entitled to claim $400 in depreciation deductions in the first year. This compares with $267 in depreciation from floating floorboards or $50 in deductions from tiles, based on a full financial year.

5. Update your schedule after the renovation is complete

A second tax depreciation schedule should be prepared after a renovation to show any removed assets identified in the original schedule and the remaining depreciable amount that can be claimed for these items as an immediate deduction. The new schedule will also detail depreciation deductions available for all newly installed plant and equipment assets or capital works expenditure as well as the depreciation deductions for any original assets remaining for the life of the property (forty years).

Investors who would like obligation free advice on how a renovation will affect their depreciation deductions can contact the expert team at BMT Tax Depreciation 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.

Investors who own income producing properties are eligible for significant taxation benefits. The Chief Executive Officer of BMT Tax Depreciation Bradley Beer says “research shows that 80 per cent of property investors are failing to take full advantage of property depreciation and are therefore missing out on thousands of dollars in their pockets.” Depreciation is missed because it is a non-cash deduction – the investor does not need to spend money to claim it.

What is depreciation?

As a building gets older, items wear out – they depreciate. The Australian Taxation Office (ATO) allows property owners to claim this depreciation as a deduction. Depreciation can be obtained by any property owner who obtains income from their property.

Depreciation facts:

• Investors can adjust previous year’s tax returns – claim missing deductions from the ATO
• An investment property does not have to be new – older properties also have good depreciation potential
• By claiming property depreciation on an income producing building the client will pay less tax

Obtaining a depreciation schedule that maximises deductions may result in an investment property returning a positive income.

Quantity Surveyors are qualified under the tax legislation ruling TR97/25 to estimate construction costs for depreciation purposes and are one of select few professionals who specialise in providing depreciation schedules. Ensure a depreciation specialist like BMT Tax Depreciation is used to prepare a depreciation schedule.

The fee is 100 per cent tax deductible

BMT Tax Depreciation specialise in tax depreciation deductions for property investors Australia-wide. For obligation free advice contact the expert team at BMT 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.