It’s time to unlock the cash flow to your investment property and claim more at tax time! Owners of investment properties are eligible to claim tax deductions for their properties and most investors are aware of the deductions they are entitled to. However, many are unaware of property depreciation which means they could be missing out on hundreds or even thousands in returns!
To help ensure you maximise your deductions, here is everything you need to know on Tax Depreciation from BMT.
What is Tax Depreciation?
As a property gets older and items within it wear out and depreciate in value. Legislation allows owners of income producing properties to claim on this wear and tear and it is called Tax Depreciation. Unlike other expenses involved in holding a property, such as repairs and maintenance, an investor does not need to spend any money to be eligible to claim it. For this reason, depreciation is often described as a non-cash deduction.
Types of depreciation deductions available
The capital works (Division 43) allowance refers to what an investor can claim for the wear and tear that occurs to the structure of the property. This includes any structural improvements that may have been made during a renovation. As a general rule, residential property investors can claim capital works deductions at a rate of 2.5 per cent per year for a total of forty years if property construction commenced after the 15th of September 1987.
Examples of items which are considered capital works are external bricks, roofs, driveways, fences, doors, clothes line as well as internal items such as built in kitchen cupboards, sinks, bath tubs & toilets.
The second type of depreciation deductions available are plant & equipment* (Division 40) assets. These items are considered to be easily removed from the property. Some items included are hot water systems, solar panels, air conditioning units, blinds, swimming pool filtration, carpet & security systems.
*Under new legislation outlined in the Treasury Laws Amendment (Housing Tax Integrity) Bill 2017 passed by Parliament on 15th November 2017, 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 previously used plant and equipment assets.
How can I claim Tax Depreciation?
In order to claim depreciation and capital works deductions property investors need a comprehensive capital allowance and tax depreciation report or schedule. We recommend a BMT Tax Depreciation Schedule which we can organise for you. When completed, a tax depreciation schedule outlines the deductions available and is used each financial year when preparing tax returns. Schedules are prepared for the forty-year life of your property or until the deductions run out.
Call BMT Tax Depreciation today to get your schedule organised!
Information from BMT Tax Depreciation
BMT Tax Depreciation
1300 728 726 | www.bmtqs.com.au
The largest and most successful tax depreciation company in Australia- the best choice to complete the tax depreciation schedule for your residential or commercial property.