New Legislation on Residential Properties
Property depreciation deductions can make a big difference to a property owner’s cash flow.
The Australian Taxation Office allows property owners to claim depreciation, or decline in value, as a deduction. Depreciation is considered a non-cash deduction, meaning an investor doesn’t need to spend any money to be eligible to make a claim. Therefore it is not unusual for these deductions to get missed.
With tax time approaching, property owners should be sure they are claiming all the deductions to which they are entitled. Owners of income-producing properties can claim depreciation deductions related to the building’s structure as well as the plant and equipment assets* within the property.
Depreciation related to a building’s structure can be claimed as a capital works deduction. As a general rule, residential homes in which construction commenced after the 15th of September 1987 and commercial properties in which construction commenced after 20th July 1982 are eligible for the capital works deductions.
Plant & Equipment Depreciation
Depreciation on each plant and equipment item, or the easily removable fixtures and fittings within a building, can also be claimed for most properties*. Plant and equipment assets include items such as hot water systems, carpets and blinds.
The New Legislation Effective from
*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.
Investors should engage a specialist Quantity Surveyor to discuss the depreciation potential of any investment property they own or are planning to purchase. They can provide a free estimate of the first year deductions available based on the scenario of the individual investor and can provide a comprehensive depreciation schedule outlining the deductions they are eligible to claim when the visit their Accountant to perform their annual income tax return.
A depreciation schedule has a one-off cost which lasts the life of the property (forty years) and will ensure the owner claims their depreciation entitlements correctly. A depreciation schedule is 100 per cent tax deductible. By ordering the schedule prior to the 30th of June, an investor will be able to claim the fee straight back in that financial year.
Regardless of when a residential property is purchased there are likely to be substantial deductions available. It is still worth discussing every property scenario with BMT.
For more information, speak with one of the expert team at BMT Tax Depreciation on 1300 728 726.
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.