As tax time draws nearer it’s a good time to start getting all of your paperwork together and assessing what you can do to put more money in your back pocket.
When it comes to maximising claims from investment properties, a lot of owners fail to full claim their depreciation benefits, possibly due to a lack of understanding of how it works or because they don’t engage the right professionals.
What is property depreciation?
It’s essentially the estimated decrease in a property’s value over time. As a building gets older, items wear out and “depreciate”. This depreciation can be claimed back as a tax deduction.
How to maximise your benefits
A property investor’s first point of call should be a registered quantity surveyor who has the skills and knowledge needed to prepare a detailed depreciation schedule that outlines all the deductions that can be made at the property.
Depreciation isn’t just for new properties
Don’t assume you can’t take advantage of property depreciation because you have an older property. While depreciation benefits are likely to be greater on newer properties, there can still be significant depreciation that can be claimed in older properties.
It is well worth investigating the depreciation benefits on any property, and you might even be able to make adjustments on your previous two tax returns if you haven’t already been maximising your tax benefits.
Don’t forget to claim on ‘scrapped’ items
Items removed from a property during a renovation or upgrade, otherwise known as ‘scrapped’, may have remaining depreciable value that can be claimed as a deduction. Engage a quantity surveyor to assess the property prior to any renovations and document items prior to their removal. Once renovations are completed a second inspection should be carried out so maximum claims can be made on new items.
Overall, the message is that every property investor should take the time and effort to see a quantity surveyor and get a tax depreciation schedule done.
Keep in mind that a quantity surveyor’s fees are tax deductible and a depreciation schedule is normally good for a number of years.