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depreciation deductions

How Investors can save thousands this October 31

Investors who self-assess or estimate costs based on their own judgement when lodging their tax return are potentially missing out on thousands of dollars, according to BMT Tax Depreciation.

With the October 31 tax deadline fast approaching, It’s common for investors to self-assess or estimate costs based on their own judgement when lodging their tax return.

However, investors who do so are potentially missing out on significant depreciation deductions by incorrectly evaluating their claims.

Depreciation is one of the most lucrative tax deductions because it’s a non-cash deduction, meaning investors don’t have to spend money to be eligible to claim it.

The Australian Taxation Office (ATO) allows owners of any income-producing properties to claim depreciation for the building’s structure via capital works deductions and for the plant and equipment assets contained within the property. 

In residential properties, capital works deductions must be depreciated at a rate of 2.5 per year for a maximum of forty years, while eligible plant and equipment assets must be depreciated over time using an effective life supplied by the ATO.

Read more about tax depreciation on the BMT Tax Depreciation website

Property investors who choose not to seek expert advice and self-assess deductions put themselves at risk of using the wrong depreciation rates and classifying items incorrectly.

As a result, they could be missing out on thousands of dollars’ worth of deductions. 

Quantity Surveyors are recognised under Tax Ruling 97/25 as one of the few professionals with the expert knowledge necessary for estimating construction costs for the purposes of calculating property depreciation.

A Quantity Surveyor can assess a property and provide a comprehensive depreciation schedule which outlines depreciation deductions accurately.

A tax depreciation schedule is the best way to ensure the biggest tax refund possible and can act as evidence should the ATO complete an audit of a claim.

There is no item too small to consider including in a schedule.

Low-cost assets and low-value assets all add up to maximise depreciation benefits.

If an asset has sufficiently low value, legislation allows it to be written off much faster or even claimed in full immediately.

A BMT Tax Depreciation Schedule covers all deductions available over the lifetime of a property (forty years) to maximise cash flow.

In FY 2018-19, BMT found residential clients an average of almost $9,000 in first-year tax deductions.

To find out more, Request a Quote or speak to the team at BMT Tax Depreciation.

Source: The Real Estate Conversation 8th October 2019 https://www.therealestateconversation.com.au/news/2019/10/08/how-investors-can-save-thousands-this-october-31/1570497759

This article provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such as it does not take into account your personal circumstances or needs. Professional advice should be sought prior to any action being taken in reliance on any of the information.

 

tax deductions

Five things to know about depreciation this tax time

With tax time fast approaching, claiming depreciation is the key to increasing cash flow from an investment property.
tax deductions

BMT Tax Depreciation has some tips for investment property owners when it comes to claiming depreciation at tax time. Below are five ways to make sure you get what is yours.

1. Don’t miss out on depreciation deductions

Property investors are entitled to a range of tax deductions which help to lower taxable income and make owning an investment property more viable.

Some of the tax deductions available include council rates, the interest from a mortgage, property management fees, land taxes, strata fees, maintenance costs, insurance, accounting fees and depreciation.

Of these deductions, depreciation is the most commonly missed.

This is because it’s a  non-cash deduction.

That is, investors do not need to spend any money to be eligible to claim it.

Research has shown 80 per cent of property investors are missing out on the depreciation deductions they’re entitled to.

To ensure that depreciation is being claimed correctly and maximised, investors should contact a specialist Quantity Surveyor, such as BMT Tax Depreciation, to organise a comprehensive depreciation schedule.

A BMT Tax Depreciation Schedule outlines all the deductions an investor can claim for their investment property. It lasts for forty years and the fee for preparing it is 100 per cent tax deductible.

During the 2017-2018 financial year, BMT Tax Depreciation found their clients an average of $8,212 in tax deductions in the first year claim alone for residential properties.

Visit BMT’s tax depreciation calculator for an estimate of the deductions you may be entitled to.

2. If you recently purchased an investment property, you can still make a claim this tax time

The Australian Taxation Office (ATO) allows investors to claim depreciation based on the number of days a property was available for lease.

A BMT Tax Depreciation Schedule makes partial year claims like this easy for the property investor and their accountant and can pro-rata deductions based on the percentage of time the property was available for rent.

3. Have you made improvements? Don’t forget to update your tax depreciation schedule

If improvements have been made to the property in the past financial year, like a renovation, it’s a good idea to get in touch with a Quantity Surveyor to see if you will require an updated depreciation schedule.

It’s important to be aware there is a difference between a repair and a capital works improvement, as this will affect the claim. The cost of any repairs can be claimed in full in the same financial year they are completed.

An improvement, on the other hand, is when you improve the condition of an item or property beyond that of when it was purchased. Such improvements are capital in nature and must be depreciated over time.

For this reason, if any renovations or improvements have been made to the property in the last financial year, the property investor should seek the advice of an experienced Quantity Surveyor to ensure their deductions are claimed correctly.

Find out more about BMT Tax Depreciation by visiting their website.

An updated tax depreciation schedule may be required after a renovation to capture all newly installed plant and equipment assets or capital works expenditure.

4. Discuss tax depreciation deductions with your accountant

An accountant will often refer property investors to a Quantity Surveyor or contact them on your behalf to arrange a schedule.

While they can process the deductions, they can’t estimate construction costs to provide you with the tax depreciation schedule.

Only a qualified Quantity Surveyor can do that.

Quantity Surveyors are one of the few professionals recognised under Tax Ruling 97/25 to have the appropriate construction costing skills to estimate building costs for depreciation.

However, not all Quantity Surveyors specialise in tax depreciation.

Only a tax depreciation specialist like BMT can be relied on to maintain detailed knowledge of all current ATO Tax Rulings relating to depreciation.

Once a tax depreciation schedule has been completed, an Accountant will input these deductions into the property investor’s annual income tax return.

5. Amend previous tax returns and don’t miss out on claiming past years’ deductions

Investment property owners often enquire about a property they have owned and rented for a number of years and they haven’t claimed depreciation deductions before.

The ATO allows tax returns to be easily adjusted for two years after the initial submission. This enables property owners to recoup some of the deductions that may have been missed.

It’s important to note a separate application will need to be submitted for each financial year requiring an amendment.

Income, depreciation and other claims made will impact the outcome of each tax return.

If you have missed or not maximised your claim in previous years, the depreciation schedule can be tailored within the eligible years.

BMT offers a guarantee to all clients that if we can’t find double our fee in deductions in the first full financial year, we won’t charge for our service.

To learn more about depreciation, visit the tax depreciation overview page on the BMT Tax Depreciation website.

 

 

Source: The Real Estate Conversation 7th May 2019 https://www.therealestateconversation.com.au/news/2019/05/07/five-things-know-about-depreciation-this-tax-time/1557189981

This article provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such as it does not take into account your personal circumstances or needs. Professional advice should be sought prior to any action being taken in reliance on any of the information.

tax time

BMT’s Top Ten Tips For Tax Time

Tax Time

It’s a new financial year and therefore it’s time to start getting your income tax return in order. Aside from being compulsory, preparing your annual tax return is a great opportunity to take stock of how your investment is performing and to make sure you’re claiming everything you’re entitled to.

Here are our top ten tips to help you get the most from your investment property this tax time.

Claim depreciation to maximise returns

Any investment property that generates income may be eligible for thousands of dollars in depreciation deductions. In fact, most investors can claim an average of $5,000 – $10,000 in deductions in the first full year alone. Property depreciation is often missed as it is a non-cash deduction; that is, the investor does not need to spend money in order to claim it. In fact, research has shown that 80 per cent of property investors are missing out on the depreciation deductions they’re entitled to.

Order a tax depreciation schedule

A BMT Tax Depreciation Schedule outlines all the deductions you can claim for your property. It lasts for forty years and the fee for preparing it is 100 per cent tax deductible.

Amend previous tax returns

Investors can amend two previous tax returns to recoup any missed deductions.

Claim for new and old properties

Investors who are unsure whether they are eligible to claim deductions due the age of their property or the items within it should seek the advice of a specialist Quantity Surveyor*. While newer properties generally do attract higher deductions – due to the higher starting value of a building’s capital works and the items within it – most properties are able to generate some deductions so it’s always worth enquiring about.

Use a split report to increase deductions

Do you co-own a property? Then it’s usually more beneficial to order a split report in order to maximise the returns for each owner. To ensure that clients who co-own investment properties are maximising deductions, it is important that Accountants recommend their clients obtain a split report. A split report calculates each owner’s percentage of ownership of the assets within a property before applying depreciation deductions. This usually qualifies more assets for accelerated depreciation and gives the owners greater returns sooner. Accountants also need to be aware that co-ownership will affect the way deductions should be calculated for assets which are eligible for an immediate write-off and accelerated depreciation.

Do you only lease your property out for a portion of the year? Then make sure you make a partial year claim for depreciation.
The Australian Taxation Office (ATO) allows investors to make a claim for depreciation based on the amount of days a property was available for lease. This could be if you’ve only recently purchased on investment property and only have one month to claim for, or you use your home as a holiday rental for part of the year. A BMT Tax Depreciation Schedule makes a partial year claim like this easy for you and your Accountant.

Make use of techniques that maximise deductions early

This includes low value pooling and instant asset write off. A Quantity Surveyor will be able to determine which assets qualify for accelerated depreciation and this will put more money back into your pocket sooner. Read more about how this works.

Claim for renovations and improvements

There is a difference between a repair and a capital works improvement and this will affect your claim. The full cost of repairs can be claimed in full in the same financial year they are completed. An improvement, on the other hand, is when you improve the condition of an item or property beyond that of when it was purchased. Such improvements are capital in nature and must be depreciated over time. For this reason, if you’ve made any renovations or improvements to your property in the last financial year, you should seek the advice of a Quantity Surveyor to ensure this is in your claim correctly.

Ensure you use a specialist Quantity Surveyor to prepare your tax depreciation schedule

Quantity Surveyors are one of the few professionals recognised by the ATO to have the appropriate construction costing skills to estimate building costs for depreciation. However, not all Quantity Surveyors specialise in tax depreciation. Only a tax depreciation specialist such as BMT can be relied on to maintain detailed knowledge of all current ATO Tax Rulings relating to depreciation.

The BMT guarantee – Be confident when ordering your schedule from BMT Tax Depreciation. BMT offers a guarantee to all clients that if we can’t find double our fee in deductions in the first full financial year, we won’t charge for our service.

*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.

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.