Tax time is here again and the key to making the most from your investment property is maximising your tax benefits. Many investors find tax time confusing and without assistance they may find themselves missing out on their full benefits. This is particularly common when it comes to claiming depreciation benefits, with many investors missing out on thousands of dollars a year.
What is depreciation?
Property depreciation is the estimated decrease in a property’s value over time. As items such as buildings, motor vehicles, furniture, and machinery and equipment age they depreciate in value, and this loss can essentially be claimed back as a tax deduction.
There is a common misconception that depreciation benefits are only available for brand new properties, however while newer properties stand to benefit the most from tax depreciation, there are depreciation claims that can be made for older properties.
A ‘capital works deduction’ claim can be made until a property is 40 years old, which is the expected life of the building itself. For properties older than 40 years, a ‘depreciating assets’ claim is available for assets such as light fittings, carpets and stoves etc.
How can you make a claim?
Find a qualified quantity surveying firm that can inspect your property and prepare a depreciation schedule for your accountant to use. A depreciation schedule is normally good for a number of years, plus a quantity surveyor’s fees are tax deductible.
You can make adjustments on your previous two tax returns if you haven’t already been maximising your tax benefits, so it’s well worth chatting to a quantity surveyor and your accountant as soon as possible to make sure your getting the full benefits you’re entitled to for your investment property.