Depreciations of Your Investment Property

Many investors are aware of their investment property depreciation entitlements and this will benefit them accordingly. Yet many are still unaware that they are able to claim investment property depreciation as a tax deduction and subsequently miss out on the available tax credits. Many investors fall into the trap of thinking that Gold Coast investment property depreciation is only relevant for brand new properties. Whilst the benefits are greater for newer properties, it’s generally still worth while claiming your depreciation on older properties. Organizing a depreciation report for your investment property could be the difference between turning a negatively geared investment into a neutral or positively geared asset and possibly providing you with a positive cash flow against a property with negative cash flow. Over time, your investment property will age. The Australian Taxation Office allows quantity surveyors to calculate a deduction from this wear and tear so that the owner can claim it and it doesn’t just apply to the building itself, fixtures and fittings can also be claimed. When properly assessed, these items can quickly add up to significant tax deductions. In terms of total returns from investment property, maximizing the tax deductions are paramount. Your accountant will ask you for a tax depreciation schedule to be prepared on each of your investment property and it is important that you had a full inspection carried out on each of these investment properties and be completed by a firm that’s approved with the tax practitioner’s board. This ensures that your tax depreciation schedule not only picks up all the depreciable items but is also ATO-complied. Luckily, most people in turn understand that it is very hard to estimate anything without seeing the property. A rule of thumb, newer properties tend to have more depreciation. The amount of depreciation can be anywhere from $1,000-$15,000 in the first year, depending on the property. By calculating depreciation on your investment property, you may be able to claim an income tax deduction and lower your overall tax payment in a financial year. When buying an investment property, you need to consider that your costs will go far beyond the initial purchase price. You will also incur costs preparing the property for rental, and maintaining it in good-working order for your tenants.

There may be initial costs fitting the property out, renovating or repairing it which is the overtime wear and tear may mean the replacement of:

• Floorings,
• Furniture,
• And appliances.

Moreover, structural improvements may need to be made. This creates an expense to you so will lower your net income. However, by calculating depreciation which is the decline in value of an asset over time, you may be able to claim your costs as an income tax deduction. Therefore, it’s important to keep detailed records of all the expenses you incur in holding a property so you can offset your tax liability. New properties have a higher Gold Coast investment property depreciation rate than older properties. It’s one of the principal reasons why many good investors prefer brand new properties in their portfolios. Building write-off is governed by the date that construction began. If a residential building was built before 18 July 1985, there is no building write-off available. However, investors who own properties built before this date are still able to make a claim on the plant and equipment (fixtures and fittings) within the property, including any recent renovations, even if that renovation was carried out by a previous owner.