TAX DEPRECIATION

Four Reasons You Should Claim Depreciation In 2023

With the start of the new year fast approaching people are formulating their annual New Year’s resolutions.

You may be thinking of the ways you can reduce the costs of owning an investment property while boosting your cash flow. Claiming depreciation deductions on your investment property may be the answer.

Around eighty per cent of investors don’t maximise their depreciation deductions, therefore it’s important to speak with a quantity surveyor to discuss the benefits of ordering a tax depreciation schedule.

To help you plan the new year, BMT Tax Depreciation have put together four reasons why investors should order a depreciation schedule.

1. YOU DON’T HAVE TO SPEND ANY MONEY TO CLAIM IT

Depreciation is the natural wear and tear that occurs to a building and the assets within it over time.

Property depreciation is a non-cash deduction which means you don’t have to spend money in order to claim it. On average, BMT finds residential investors almost $10,000 in deductions within the first full financial year alone. The Australian Taxation Office allows investors to claim capital works deductions on the building structure over the effective life of the property (forty years) and depreciation for plant and equipment assets based on their individual effective life. By claiming property depreciation, you’re reducing your taxable income and can benefit from receiving more in your annual tax return or avoiding having to pay additional taxes.

2. EVERY PROPERTY INVESTOR CAN BENEFIT FROM A DEPRECIATION SCHEDULE

Some investors think their investment property is too old to attract depreciation deductions however this is untrue. Both new and old properties will provide some depreciation deductions for their owners.

In November 2017, the federal government made changes to the way investors claim depreciation for plant and equipment assets. If you exchanged contracts on a second-hand residential investment property after 7:30pm on the 9th of May 2017, you can no longer claim depreciation for any previously used plant and equipment assets within the property.

You can still claim depreciation for any brand-new assets they install once the property is income-producing. You can also claim qualifying capital works deductions relating to the building’s structure and any items permanently fixed to the property. These deductions typically make up between 85 and 90 per cent of a total depreciation claim.

3. ADJUST PREVIOUS TAX RETURNS

If you haven’t been claiming or maximising depreciation for your investment property, previous tax returns can be adjusted and claimed back.

4 . THE FEE IS 100 PER CENT TAX DEDUCTIBLE

Although there is a cost involved in arranging a depreciation schedule, the fee is 100 per cent tax deductible.

If you would like more information on how you can benefit from a depreciation schedule, Request a quote or speak with one of our expert staff on 1300 728 726. Bradley Beer (B. Con. Mgt, AAIQS, MRICS, AVAA) is the Chief Executive Officer of BMT Tax Depreciation. Please contact 1300 728 726 or visit bmtqs.com.au for Australiawide service.