Owners often miss out on thousands of dollars due to not knowing what depreciation claims they are entitled to when renovating or refurbishing their investment property. As a building gets older, so does the structure and the items contained within the property. The Australian Taxation Office (ATO) allows property owners to claim this wear and tear on any income producing property as a depreciation deduction over time.
Renovating can be a daunting process due to the expense that comes with it. The deductions available from depreciation can be a valuable source of funds to help with the process. To ensure you are taking full advantage of depreciation deductions when renovating, we have listed some must know facts:
1. Understand scrapping
The term ‘scrapping’ refers to the removal or disposal of assets contained within an investment property. When assets (like carpet, blinds and hot water systems) are removed and replaced, the owner of the property is entitled to claim this remaining depreciation as a tax deduction in the same financial year of the item’s removal. This provides the owner with a boost in their cash flow which can be put towards the costs of renovation.
2. A ‘before’ renovation assessment
It is recommended to arrange a tax depreciation schedule on your property before work is carried out. This allows a specialist Quantity Surveyor to accurately calculate the value of each plant and equipment asset as well as the structural items contained within the building. Completing this process will save time and money. Should the ATO perform an audit of the owners claim, all measurements and photographic evidence are recorded.
3. An ‘after’ renovation assessment
Once renovation works have been carried out, a second schedule is recommended to identify the value of all new plant and equipment assets and structural items that have been added to the property. At only a small adjustment fee, a new depreciation schedule is prepared identifying the deductions available over the life of the property. This cost, like that included from the original schedule, is 100 per cent tax deductible.
4. Enlist a reputable Quantity Surveyor to prepare your schedule
Organising a depreciation schedule from a credible Quantity Surveying company like BMT Tax Depreciation could save a property investor thousands of dollars each financial year. Not all Quantity Surveyors specialise in tax depreciation like BMT do. Preparing compressive tax depreciation schedules that outline the highest possible deductions within ATO guidelines is BMT’s speciality. Calculating depreciation is quite a complex task, so it’s best to leave it up to the experts.
To find out more about property depreciation, visit the BMT Tax Depreciation property investor page by clicking here or contact one of our friendly staff on 1300 728 726.
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.