As we wrap up the year and head towards 2016, investors may begin to formulate their New Year budget.
When preparing a budget investors often think about how they can reduce the costs of owning an investment property and wonder how they can boost their cash flow earned. What many investors often fail to consider is the depreciation benefits available to them.
Around 80% of investors do not maximise the depreciation deductions available from their investment property. To help investors improve their cash flow position in the New Year we encourage them to enlist an expert to complete a tax depreciation schedule on their property.
Here are three great reasons why investors should request a schedule in 2016:
1. Claim an average of $5,000 to $10,000 in the first year alone
Property depreciation is considered a non-cash deduction, which means no money has to be spent in order to claim it. The Australian Taxation Office (ATO) allows investors to claim depreciation on the gradual wear and tear of both the building structure and the plant and equipment items contained within the property.
Structural items can be claimed using capital works deductions. Capital works deductions are claimed over the effective life of the property (forty years from construction commencement) where as plant and equipment items are claimed based on their individual effective life set by the ATO.
On average, a BMT Tax Depreciation schedule will identify between $5,000-$10,000 in deductions in the first financial year alone. Significant deductions follow for the life of the property.
2. Every property investor can benefit from a depreciation schedule
Owners of older properties, holiday home owners who personally make use of their investment throughout the year and those who lease out part of their house whilst still residing in the property often believe they are not eligible for depreciation claims. This is certainly not the case.
- Depreciation deductions can be claimed for all types of investment properties including residential, commercial, industrial, retail, manufacturing, hotel and tourism accommodation whether the building is new or old
- Owners of holiday homes can claim deductions during times when a property is available for rent and income producing. A BMT Tax Depreciation Schedule can calculate partial year deductions for an owner if they decide to use the property for personal use throughout the year
- Depreciation can also be claimed for sections of a residence that may be rented out or that are used to produce an income as a business. In these scenarios BMT will prepare a depreciation schedule which can be easily used by the owners Accountant to calculate the depreciation portions they are entitled to
Seeking advice from relevant professionals such as an Accountant, a Financial Advisor and a specialist Quantity Surveyor will ensure no deductions are missed.
3. The fee is 100% tax deductible
Although there is a cost involved in arranging a depreciation schedule, the fee is 100% tax deductible. Investors who pay for their schedule prior to June 30 can claim the fee back in the same financial year. This is all the more reason why investors should arrange their schedule in the lead up to a financial year rather than wait until tax time.
By claiming property depreciation, investors are essentially reducing their taxable income and therefore may benefit by receiving more in their annual tax return or avoiding having to pay additional taxes.
Investors who own or are planning on purchasing an investment property that would like to find out more about their depreciation entitlements can contact one of the expert staff at BMT Tax Depreciation on 1300 728 726.
If you would like to read more about property depreciation, visit the property investor’s page on the BMT website by clicking here.
Article provided by BMT Tax Depreciation.
Bradley Beer (B. Con. Mgt, AAIQS, MRICS) 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.