The Transition of Property Tax Cash Position

It is often a surprise to property investors who own an old building to find that property depreciation will attract significant depreciation benefits for both new and old properties. Property owners who have not been claiming depreciation are able to go back and amend previous returns to claim missed deductions in previous financial years. Ensuring that each depreciation claim is maximized on any building requires a combination of construction costing skills and thorough knowledge of current tax depreciation legislation. This is the reason why it is recommended for investment property owners to consult a specialist Quantity Surveyor to prepare a Depreciation Schedule before lodging their tax return. Rental property depreciation is a non-cash deduction that the Australian Taxation Office (ATO) allows any owner of a rental property depreciation to claim due to the wear and tear of a building over time. The latest value-adding tool for property professionals, New to Rent, provides Property Managers with complimentary depreciation estimates tailored for each rental property their agency lists.

The estimates highlight the difference depreciation can make to an investor’s cash flow and ultimately help industry professionals establish a point of difference in today’s competitive property management industry. For investor clients, being advised of the potential depreciation deductions they could be claiming is a valuable source of information, helping them to determine their after-tax cash position. These kinds so assets would normally depreciate at a pre-determined rate set by the ATO, which varies between assets. Property investors who acquire low cost assets and choose to place them in the l for example, if an asset is valued at $300 or less, the owner of the rental property depreciation Gold Coast will be entitled to write-off the full amount in the first year. If the asset is valued at $1,000 or less, increased rates of depreciation can be applied through the low-value pool. A low-cost asset is a depreciable asset that has an opening value of less than $1,000 in the year of acquisition. This can include things like cooktops, range-hoods, exhaust fans and blinds. Properties with long leases will be better equipped to handle a transitioning property cycle.

One of the categories with typically longer-term leases is that of childcare, that has been a perplexing sector of the market, particularly in the later stages. There is a real disconnect developing in this sector, and a proliferation of developments to the point that some localities are being saturated and over developed. We have been seeing 30%-plus profit margins in the development of these facilities for rental property depreciation where the sales of the finished products are yielding 30%-plus profit on the total cost base. In one case in the outer western metropolitan area a new facility sold for around $6 million, on a cost base of circa $3 million. That profit margin has been the catalyst for the overheated development frenzy of childcare. It will self-regulate soon, because we are seeing these new centers failing to reach appropriate occupancy thresholds to justify their business models. There is a lag effect, but it will come to the fore in time. Although there have been recent changes to rental property depreciation Gold Coast legislation there are still thousands of dollars in deductions to be claimed by property investors.