tax return australia

Tying your depreciation schedule to your tax return in Australia

Your depreciation and tax return in Australia is your best asset for putting money away into your bank account. It doesn’t matter if you live and work overseas. Your Australian revenue is guaranteed when you have investment properties and professionals taking care of them.

When you purchase investment properties, whether commercial or residential, you must always declare the income they bring you. Returns are minor in the beginning thanks to negative gearing. This happens when the overall expense of maintaining the property costs more than your rental income. But you’ll get your money back over time thanks to depreciation and claiming other items on tax.

As your property, and the items in it, depreciate over time, it equals more money in your bank account. You’ll receive the maximum benefit when you get a depreciation schedule from a professional. We have a lot of clients asking about this process and how it works. This is what we tell them:

  • Buy the property and finalise the settlement
  • Call Deppro and schedule a visit
  • The quantity surveyor visits the property, takes pictures, and makes notes
  • Answer any questions the surveyor has and provide the necessary documents
  • Your depreciation schedule arrives

When you receive your depreciation report, hand it over to your accountant who manages your tax return in Australia. They’ll amend past returns and use the report to get you the best amount back on future ones.

It’s easier than you might think to tie your depreciation schedule to your tax return in Australia. Of course you’ll be affected by negative gearing (unless you snapped up an amazing property), but depreciation and other tax deductions over time will earn your money back. Once the quantity surveyor has done their job and the report is yours, hand it over to your accountant. They’ll make sure your investment pays off.

property investment

5 ways to find the best property investment

The idea of property investment is exciting. Whether you’re looking to expand your business or you’re an investor wanting to add another portfolio, the anticipation outweighs the dread…most of the time. People who are new to the property game often find themselves disappointed and reaching too far outside their budget. How do you avoid this yourself?

  • Be realistic

You have dreams, but reality will give you a rude awakening if you’re not careful. Working towards a goal slowly and steadily ensures stable growth. If you peak too high, too fast it will all come crashing down. Not meeting payments, having bad tenants, or finding faults with the property after purchase are all possibilities if you rush into buying.

  • Hunt everywhere

Even though most people still look for their next property investment online, the newspaper listings are still a valuable resource.

When we say hunt everywhere, we also mean broaden your search radius. Seasoned property investors and business owners have places all around Australia. Search online for the best growth suburbs in Australia, you’re bound to see something that ticks the boxes. Which leads us to the next point.

  • Write a list

This will keep you on track, and honest. Whether you call it a purchase plan, a property checklist, or something else, make sure it’s on hand when you’re looking at places. If you’re concerned about depreciation, add these to the list:

  • Has any renovation work been done recently?
  • Are the fixtures in good condition?
  • Will this still give me income X years from now?
  • What’s the area in meters squared?
  • Turn off your emotions

This step is crucial. Letting your emotions get into the mix leads to burnout and heartache. When things don’t turn out the way you hope (you lose the bid, offer rejected, etc) of course it’s disappointing. But you keep your chin up and carry on. The best property investment for you is out there; you just have to look a little harder.

This point ties into point number one about realism. If you’re an investor looking for rental properties, don’t think about the hunt as looking for your dream home. Not even if it’s ten years down the track. You’re looking for a place that will attract tenants and generate income for you. The best property investment for you might be a home or an apartment that doesn’t  suit your tastes, but will be perfect for someone who rents it from you.

  • Get the professionals on your side

As soon as the property is settled, call Deppro to have a quantity surveyor inspect the property. You’ll receive the best, most accurate depreciation schedule if they see the place in its original condition.

Also invest in a property manager to find tenants (again, avoiding emotional investment). They’ll manage the bulk of caring for your portfolio. After you receive your tax depreciation report, hand it over to your accountant. They’ll make sure you get the maximum refund every year, contributing to your coffers so you can keep growing.

rental property depreciation

4 common rental property depreciation questions

We answer rental property depreciation questions on a daily basis here at Deppro, and some have popped up more than others. If you’re new to the tax depreciation world, or just need a refresher to jog your memory, read on.

  • What’s the difference between ongoing and capital expenses?

When you hire a property manager, pay for advertising and cleaning, alongside various fees and rates for council and the like, they’re ongoing expenses.

Capital expenses contribute directly to your rental property depreciation. Capital works like the rendering of the building, any electrical work or appliances installed are eligible.

  • How can I measure depreciation potential?

You can go the old fashioned route and crunch the numbers yourself, but what’s the point if you don’t have to? Deppro has a free online depreciation estimate tool that’s trusted by investors, tax agents, and real estate professionals. You’ll need the following information:

  • Date of construction
  • Purchase price
  • Floor area
  • Location
  • Type of structure
  • Can I claim depreciation on previous renovations?

Yes you can! The beauty of rental property depreciation is you can claim existing works on any structure built after 1987, regardless of who completed them. You own the building after settlement, so the plant & equipment and capital works depreciation are yours.

  • What can I deduct at tax time?

This is one of the rental property depreciation questions we can’t answer. If you’re looking to claim deductions for your tax return, it’s better to ask your accountant. They’ll have your existing portfolio, previous tax history, and the other information they need to give you a better answer.

What you can depreciate is another matter. For example, if a tenant has caused damage to the property and you need to conduct capital works to fix them. You’ll have to make adjustments to the depreciation schedule, but you can claim depreciation on the works for as long as you own the property.

Customers rely on Deppro to answer their rental property depreciation questions before and after adding to their portfolios. Our blog has extensive advice on a range of topics and we’re available anytime over phone, or at our offices in capital cities around Australia.

real estate

3 real estate strategies to build the ultimate portfolio

Commercial, residential, apartments, houses, duplexes; the potential in real estate is endless. There’s different real estate strategies that investors can use for any of the above. Each approach has its pros, cons, and methods that will build your portfolio into something amazing.

Commercial property

There’s more differences between commercial and residential real estate than just the name. When placing a deposit on a commercial property, expect to put down up to 30% of the settlement price. You’ll also need a tenant that guarantees income no matter how competitive the market.

Lots of work goes into researching commercial real estate. Investors must look at demographics, market potential, spending habits of residents, and the like to make sure they get the best return. When the tenant signs the lease, the contract will last a long time compared to a residential one. Think between three and ten years.

Capital growth

You put a lot of work into finding a good piece of real estate, so it should work for you in return. Capital growth means you hold onto the home for a while, expecting it to make a nice profit when the time comes to sell. The resale price is affected thanks to area profile like access to schools, public transport and shopping.

Investors using this strategy must have patience if they want to see the benefits. Working a depreciation schedule into this will also help you net a larger profit. When the building depreciates, so does the cost base. Lower cost base (aka lower worth at resale) means less capital gains tax to pay.

Surrounding suburbs

It’s oh so tempting to buy in a capital city, but it costs more money and there’s often too much competition. The Australian apartment glut means investors are snapping up properties in bulk, almost suffocating each other in one suburb or just one building.

Popular growth areas aren’t just suburbs in the city. Regional, outlying real estate is great for negative gearing, with the eventual goal of a profit at resale. This is because investors see the potential in the homes and the general area and have the patience to wait for the right time to sell.

property investor

5 types of property investor

There’s a common perception that a property investor lives the high life. Their portfolio rakes in hundreds of thousands of dollars that funds an extravagant lifestyle others can only dream of. This is true, but only for a small number of them. One type of property investor likes to boast about their success, others prefer to keep it quiet. Do any of these traits look familiar?

The dreamer: This type of property investor has big visions of wealth, owning a large portfolio, and making it in the ‘big leagues’. You’ll find them constantly looking at property listings and researching suburbs with good growth. It’s good that this investor does their homework, but their dream might cost them if they put down a deposit they can’t afford. In property, you must spend money before you can make it, something that this type forgets.

The renovator: This property investor looks at the old and outdated, sometimes the crumbling, and sees something beautiful: potential. Occasionally they’ll buy the home for the sake of the land because it’s in a good location, and demolish the house. They’ll build it up again into a property that will attract tenants and give them a better return. This type of property investor, though, has sometimes  watched too many renovation shows and has visions of doing everything themselves. That’ll turn the investment property into a money pit rather than an asset.

The silent assassin: You’ve seen agents and reps on the phone at auctions communicating with their clients and making bids. This type of property investor has the experience to know what they want. They’ll trust a rep to inspect the property on their behalf and put down money at the auction.

Another side to this investor is they’ve often got a full or part-time job that keeps them busy. They don’t boast about their property prowess. When they turn up at the auction they’ll wear sunglasses and stand at the back of the crowd. They look like a silent observer…until the bidding begins.

The wise: This property investor isn’t necessarily older, but they’ve got experience in the property market. They were born into it, had an early interest, or just educated themselves. The wise property investor does their research, knows the best growth suburbs, and has their property manager on speed dial.

The one-home ponies: This type is probably your parents, or someone else’s. After the children leave the nest, their parents move into a smaller home. Some will sell the family house, others will renovate it and lease it out to tenants. They’re an ‘accidental’ investor, and don’t think of hiring a property manager or getting a depreciation report until someone else suggests it.

property report

What NOT to do before and after getting your property report

One of the great successes you can make as an investor is getting your property report done and dusted to accurately list all claimable tax depreciation items. By having a tax depreciation schedule, you’re getting more money in your tax returns and that can take you to your financial goals faster. But if you make mistakes like these, it’ll end up costing you instead.

Maintenance

Ideally, you want to have purchased a property that’s recently undergone renovations. It’s fixtures are relatively new and you can claim depreciation on work the previous owner has done.

If you did your homework before signing on the dotted line, then there’s not much cause for concern. But a crumbling, ‘project’ property will drain the money faster than you can earn it back because you’re spending it on new fittings and appliances.

Tenants

When you submit your property report to your accountant, the next step is to hire a property manager to look for tenants. Don’t do this job yourself; it makes the hard stuff more complicated down the road. For example, what happens after you get friendly and the tenants do something that would normally get them evicted? Are you prepared to look them in the eye and ask them to move out?

Letting a property manager choose the tenants will save you an emotional and financial headache. A good tenant won’t cost you money because they treat your property with respect and follow the rules.  

Investment Strategy

Like any business owner, you’re hiring professionals like depreciation specialists to take care of your property report. You’re paying property managers to handle your asset so you can focus on expanding your portfolio. All of this is part of an investment strategy. Don’t treat the property game like a hobby; it’s a business.

Having success in property investment means having a level head and doing the right things. By not buying old, crumbling buildings and by letting someone else screen tenants, you’re on your way to becoming a successful businessperson. Tax depreciation, property reports, and other formal matters are hard tasks, but worthwhile when you’re creating a successful brand. Having the professionals, like Deppro, on your side makes it easier.

investing in property

How to survive investing in property

Investing in property is a path many choose to grow their wealth. Experienced investors, like those who take mentorship roles in Property Club, have a couple of dozen properties around Australia. Others are content with having just two or three in their portfolio. First-timers wonder, though: how do these experienced investors survive the game?

One aspect is knowing what could go wrong, and taking measures to prevent it. Investing in property isn’t a matter of ‘I’ll buy a place and hope for the best’. It’s a strategic game, and there’s every chance of losing. Dodgy tenants, bad property managers, natural disasters, and debt,  are just some of what can go wrong.

It’s important for investors to do their homework, and those who’ve played the game a while don’t even have to think about it. Seasoned investors look at property condition, the potential for capital gains tax, the ideal tenant for the place, and how much competition (other investors) there is in the surrounding area.

When you’re investing in property, you’ll also need a team of professionals on your side to handle the things you can’t. The same way you’d call a plumber to fix the pipes, you need a depreciation professional to make your depreciation schedule. Deppro’s quantity surveyors do their best work after the deal on the property is settled and they can inspect it in the condition you bought it. If you want to continue investing in property, having a depreciation schedule in hand will get you there faster.

To survive investing in property it’s important to know the risks, accept them, and do whatever you can to prevent them. You also need to do your homework on the house, apartment, or whatever else you want to add to your portfolio. To have a chance in the game, call on professionals like Deppro to get the ‘official business’ around your tax depreciation sorted.

depreciation schedule

A beginner’s guide to a depreciation schedule

A depreciation schedule is a necessary tool that every property investor or business owner must have if they want to pay less tax and recover debt faster. It has been said that in some circles up to 80% of investors don’t know that they can depreciate their investment property, some don’t even understand what depreciation is.

Claiming the property and the items inside it on your tax return will give you a higher return, but not straight away. Items depreciate over time, and their depreciation costs will increase the longer an investor owns them because they’re given a ‘lifespan’ for their usefulness. Any item, from the fire alarm in the ceiling to the carpet on the floor, depreciates in value. Items under $300 are instant write-offs.

The depreciation schedule

It always contains two categories: capital works, and plant and equipment. Capital works are part of the property itself and any renovations done to the structure. Work done to the kitchen, the carpets, and even the patio gets included in capital works depreciation.

The plant and equipment category is comprised of items that can easily be moved out of the home or commercial premises. Whitegoods, furniture, electricals, and even rubbish bins are included. This is the category that some investors have trouble with because they don’t know they can even claim rubbish bins as an instant write-off.

The depreciation calculations, though, rarely get done by the investor who owns the property; this is a job for a quantity surveyor. After the property settlement, the new owners must get a surveyor in as soon as possible so they can make an accurate assessment. They’re the ones who write up the depreciation schedule. They calculate the value of the items in the home and how they’ll decline in value over time. Depreciation schedules last forty years, starting from the settlement date.

Investors don’t have to worry about working the depreciation schedule into their tax return, either. Once the quantity surveyor has completed their assessment, the investor’s accountant can handle the rest. They use the schedule as a guide to assist in making an accurate return. They’ll do their best to make sure their client pays as little tax, and gets the best refund, possible.

Business owners without a depreciation schedule are missing out hundreds of thousands of dollars over the time they own a property. Contractors like Deppro come to assess what their clients can claim, and work hard to ensure they get the maximum amount back.

investment property calculator

The investment property calculator explained

Deppro’s free investment property calculator for tax depreciation is a powerful, handy tool for investors that they should take advantage of. Deppro is well-versed in tax depreciation, with expert staff and quality advice servicing all of Australia. Potential and current clients will definitely find the calculator useful but will need some help understanding how to use it.

The investment property calculator is great for the pre-purchase stage. When you’re inspecting the property, getting the specs like the floor area and the age of the house help with initial calculations. It’s a simple matter of entering that data plus estimated purchase price. The calculator’s algorithm generates results in seconds, giving you an estimate over a decade plus. On top of that, it will say how much you’ll earn back in a three year period.

Printing out the results of the tax depreciation calculator will benefit your overall investment strategy. If you’re applying for a loan to finance your investment the calculator results are ideal to take to the bank. It’s a common strategy for investors to use the money from tax returns to pay off debts so they have better loan to value ratios (LVR).

The investment property calculator results can also be a useful marketing tool if you are considering selling. As a mini depreciation schedule, agents can use it to highlight the ROI potential to their clients. The results are a tangible example of the advantages investors can expect, and that can certainly aid in closing a sale. Real estate agents partner with Deppro because they get easy access to online reports. Their clients, too, are guaranteed entitlements from the properties on the market.

Deppro’s free tool is a powerful asset for investors and real estate agents alike. Investors can have it on hand when they visit the bank to discuss loan options. The results from the investment property calculator will show the lenders they’ll have access to funds to pay off debt in a shorter amount of time. It’s convenient, too, when investors want to look at earning potential before adding to their portfolio. The calculator is also a real asset to real estate agents. Having access to online reports and the calculator is an invaluable sales tool. When presenting to clients, the agent has evidence about how their client can earn.

tax depreciation schedule

Quantity surveyors and your tax depreciation schedule

Who writes your tax depreciation schedule? Your trusted quantity surveyor does. You can’t get a schedule without them for a variety of reasons.

How early can I engage Deppro as my quantity surveyor?

You can engage Deppro very early in building projects. In fact quantity surveyors are more often associated with building and construction during initial project stages. They look at the building plans and the list of materials required, and from that they estimate costs.

Quantity surveyors work in a field that has the potential to take them around the world. Where there’s a building site, their services are required. They’re in their offices the  majority of the time writing reports and analysing information, though site trips are frequent.

Education

Before they work on building sites or for tax depreciation firms, an aspiring quantity surveyor attends university for their bachelor’s degree. These studies centre around urban development, construction design, engineering, and some economics specialities.

In Brisbane, for example, students enrol in a Bachelor of Urban Development (Honours) (Quantity Surveying and Cost Engineering). Students learn about cost engineering, business and tax law, architectural design, and more. By the end of the course they’re versed in building design, able to handle costing queries, and make effective property analyses.

Why not my accountant?

Your accountant is there for your financial needs. It’s their job to give advice and handle your statements, invoices, and returns. They aren’t licensed or versed in how to value property and all of the specifics of materials inside.

The ATO won’t accept a tax depreciation schedule from anyone else. Deppro’s quantity surveyors are qualified to make site visits, analyse the data and estimate the costs. They use critical thinking and analytical skills when looking over a property. Through this you’re guaranteed a thorough report that gives you maximum benefits.

The tax depreciation schedule is a ticket to the best return for anyone with an investment or commercial property. It contributes to your tax return, boosting it by tens of thousands over the time you have the investment in your portfolio. Deppro’s quantity surveyors are highly educated, accurate in their estimations, and accredited by the ATO, setting you up for nothing but success.