If you are buying an investment property then you should arrange for a tax depreciation schedule to be prepared for your accountant to get the tax benefits for your property. Mayssam Raslan from Key Property Inspections has written a detailed description as how a tax depreciation schedule can benefit you:
Nearly 90% of people underestimate the power of tax depreciation, they don’t claim it and lose thousands of dollars in tax offsets. Read on to join the 10%
Do you own an investment property? are you looking to invest or know someone who does? Do you ever hear conversations that sound like… “is now a good time to invest?” “where’s good to buy right now?” “how can I get my foot in the door?” chances are the opportunities to save on tax and maximise your property are being overlooked. There is also a risk here that not knowing about this attractive and lucrative method of saving money is hindering your opportunity to take the leap. Here are some answers to similar questions that can help you do it the right way.
WHAT IS A TAX DEPRECIATION SCHEDULE?
A depreciation schedule assists you in paying less tax. This will give you a year on year figure that you can claim, effectively reducing your taxable income. Essentially it is a comprehensive report detailing the depreciation deductions claimable to you within your investment property. The depreciation entitlements can be broken into two simple categories; Capital Structure ie; Bricks and mortar, the building structural components, tiles and concrete. And Plant & Equipment Items ie; Bathroom Accessories, Exhaust Fans, Hot Water Systems, Carpets, Vinyl, Blinds, Curtains, Air conditioners, Door Closers, Ovens and many more!
The Australian Tax Office (ATO) allows property investors to claim depreciation as a deduction on their taxable income each financial year, for any income producing property. These deductions reduce your taxable income allowing you to pay less tax and increase the cash flow from your investment property.
HOW DO YOU MAKE A CLAIM FOR A DEPRECIATION SCHEDULE?
Key Property Tax Depreciation can assist you by preparing a thorough depreciation schedule that will allow you to recoup part of the costs of owning an investment property. An onsite inspection is required to record, assess and identify depreciable items of the property. In order to make a claim for depreciation you need the report to break down the property values into different categories. Capital structure and Plant and Equipment.
To complete the schedule we will separate the plant and equipment items (hot water system, oven, dishwasher, etc) from the structural elements such as bricks and concrete. The values of these items are then calculated based on diminishing value rate. This is also determined by their life expectancy.
A completed schedule is then delivered to your accountant, which they can apply to your taxable income. The amount the depreciation schedule says you can claim effectively reduces your taxable income.
CAN I GET MY ACCOUNTANT TO DO THIS?
While accountants are great at doing what they do; only a quantity surveyor is allowed to estimate the costs of construction on properties built after 1987. Quantity surveyors are also the experts when it comes to preparing these schedules. So we’ll leave the accounting to the experts, and do what we’re best at.
CAN I CLAIM DEPRECIATION ON MY PROPERTY – NO MATTER HOW OLD IT IS?
The simple answer is yes. Ultimately what kind of depreciation you can claim depends on the age of your property and when you purchased it. For properties built after 16th September 1987 you will be able to claim both the Building Allowance and the Plant and Equipment, provided you purchased the plant and equipment. For properties built before then you’ll only be able to claim the Plant and Equipment which you have purchased purely for the investment property. There are also elements of capital improvements which can be assessed and applied to the schedule. They depreciate similarly to the capital structure and assume a life expectancy of 40 years.
HOW MUCH WILL MY PROPERTY DEPRECIATION SCHEDULE COST?
A few factors can determine the cost of preparing your schedule such as the type of property you’ve purchased, date of purchase, size etc. Generally, you will find a tax depreciation schedule costs between $600 to $700, this is a once off cost that will save you money for years and years to come.
HOW MUCH TAX WILL I SAVE?
How much tax you will save depends on your property there are many varying factors that must be considered when preparing a property depreciation schedule. The best option is to give us a call for a friendly, free, no obligation chat about your property. We can often give you an estimate or at least understanding of the schedule and expectations over the phone. I wouldn’t bother paying for a property depreciation estimate
HOW LONG WILL IT TAKE TO COMPLETE MY SCHEDULE?
Your Schedule will be prepared within 7 business days after the onsite inspection is complete. Provided of course that we have all of the relevant details such as available tenancy dates, dates of capital improvements etc. Then you just need to hand it to your accountant to begin saving!
I’VE ONLY JUST FOUND OUT ABOUT TAX DEPRECIATION! IS IT TOO LATE?
No! In fact with a Tax Depreciation Schedule your accountant can apply your tax returns for up to two years. Meaning that you have savings just waiting to be claimed.
WHY IS KEY PROPERTY TAX DEPRECIATION THE BEST CHOICE FOR MY DEPRECIATION SCHEDULE NEEDS?
- Key Property makes the process as easy as possible for you. Once we have the details of a property, we take it from there, contacting the Property Manager or tenant and organising the onsite inspection.
- We also provide ongoing support. If you have questions please feel free to contact us and discuss them.
- The turnaround time is five to seven days from all information being received.
- We offer a tailor-made service to suit your property and scenario.
- Our report is structured to allow you to recoup missed deductions for up to two years if you have not been maximising your deductions.
- We work with your Accountant and Property Manager to simplify the process for you. We can also send a copy of your schedule and liaise directly with your Accountant.
the team at McKay Business Services are all members of the AICSA and are proud Adelaide conveyancers