4 Things to Know About Your Tax Depreciation Schedule

When you claim depreciation it will help in enhancing cash flow from the property. As per ATO rules, businesses can specify depreciation as an expenditure while reporting the income tax return for a specific period. You may refer to tax depreciation tables 2015 when you mention depreciation as an expense. The amount will help in bringing down your taxable income. All residential property and commercial property have depreciation value. The tax regulatory authority summarizes and compiles these deductions in a report known as the tax depreciation schedule.

Here are the things that you must be aware of about the tax depreciation schedule:

1. Consult with a Quantity Surveyor

When you own an investment property, you will remain eligible to claim several tax deductions. It will directly bring down your taxable income. The deductions may include council rates, management fees, accounting fees, and maintenance expenses among others. Meanwhile, the depreciation deduction is separate as it is non-cash. It implies that you are not required to spend money when you seek to claim a depreciation deduction. Many property owners end up missing it. You should consult with an expert Quantity Surveyor who will help in maximizing claims and preparing a schedule. The main motto of all property investors in Australia is to improve their tax refund as much as possible.

2. Categories

The depreciation schedule contains two categories namely capital works and plant & equipment. Capital works involve the property’s actual cost, structures, renovations, and extensions. It has emerged as a vital part of the schedule. Fencing, paving, and sheds including some other permanent assets are also an integral part of this category. Meanwhile, plant & equipment includes assets such as furniture, flooring, and appliances, among others. The procedure of claim includes inspection of the building and fixing a value to each asset.

3. Lease days

The ATO permits you to claim depreciation till the time property remains available for lease. If you happen to be a new owner of an investment property, you will still be allowed for a claim. In this situation, the claim will mainly depend on the number of days the property remained available for rent.  When you consult with experts and accountants, it is necessary to ask about partial claims within the year and pro-data deductions depending on the lease tenure. When you lodge your tax return Australia online, some vital details will already be filled for you.

4. Previous years claim

There are times when property owners tend to miss claiming depreciation deduction for many years due to ignorance. However, now ATO permits adjustment years after the first submission. This implies that you may file an amendment application for the missed depreciation deductions.

Conclusion:

You must be aware of the aforementioned things about your tax depreciation schedule. Soon after you improve your property, you need to hire a professional Quantity Surveyor to help you prepare a detailed claim. Your motto must be to enhance your Yield on investment property. You should not get confused between repairs and capital works improvement. It is because the claim procedure for the two remains different. This is the reason why you need to hire a professional as it will ensure that your deductions are correct.

Significance of Tax Depreciation for Property Investors

Tax depreciation plays a vital role for property investors. It can significantly enhance cash flow for them when they prepare their property depreciation report effectively. They can also bring down their payable tax. The goal of an individual is to bring down tax liabilities and it can be achieved by claiming tax depreciation. And, when you desire to maximize your cash flow, you can, once again, do so by claiming all existing tax deductions.

Let’s understand the importance of tax depreciation for property investors with the following questions and answers:

Why You Must Claim Tax Depreciation Deduction?

Tax depreciation deduction, in combination with other existing tax deductions, can bring down your tax payable thus leaving more money in your pocket. A large number of investors are aware that they will be able to claim a tax deduction for property management fees, interest, repairs, and maintenance. However, some of them end up missing out on claiming tax depreciation deduction. As interest rates are quite low, tax depreciation deduction can significantly emerge as one of the major deductions claimable. They should effectively get their investment property depreciation schedule prepared with the help of reliable professionals. Depreciation deduction will bring down your taxable income and assist your property return a positive cash flow.

Will All Property Investors Require a Tax Depreciation Schedule?

It is imperative to investigate obtaining a tax depreciation schedule if you are keen to enhance all your capital allowance and tax depreciation. Owners of qualifying residential property or commercial space must order a tax depreciation schedule if they plan to claim one of their major tax deduction. You must also need to find out if your investment property qualifies or not. You may hire leading professionals who may carry out an estimate of tax depreciation deductions available for you.

How You May Claim Your Tax Depreciation Deduction?

The most convenient way to claim tax depreciation deduction is to get a tax depreciation schedule prepared from quantity surveyor tax depreciation. He will prepare your tax depreciation schedule for your accountant so that he may apply it at the right time. It is worth noting that your accountant is not eligible to assess the construction cost for generating this deduction for you. Some property investors are not aware of whether they need to pay for their tax depreciation schedule every year. It is important to note that they are not required to pay for it every year. It is because it is a one-time investment that remains completely tax-deductible in the year you buy it.

Conclusion:

Tax depreciation holds great significance for property investors. You also need to get your depreciation schedules for rental property prepared from quantity surveyors. Free updates are allowed to be made where you have replaced, added, or improved assets or carried out small improvements. In case you have just completed major works and estimation is needed, you may have to pay a fee. You must not become such a property investor who fails to claim one of the biggest tax deductions available.

How Depreciation Works for a New Investment Property

Tax allowance has the potential of making investment property profitable and depreciation has emerged as a key allowance. Depreciation residential rental property is a vital tax allowance that you must not forget to claim. Depreciation is a crucial element of a property investor’s investment strategy. It is important to note that depreciation tax breaks remain higher on new properties. However, they are available for all kinds of investment properties whether they are old or new. A large number of investors end up missing out on important tax breaks every year.

Here is how depreciation will work for a new investment property:

What is depreciation?

According to the Australian Tax Office, depreciation can be described as when assets decline in value as they age. It can be described with an example. Let us take an instance of a $2000 desktop computer on which ATO allows four years. It will provide you a $500 deduction every year over a period of four years. You should be aware of how and when to lodge your Australian tax return.

How property investors will claim depreciation?

Property investors will be able to claim for depreciation in two ways namely capital works deductions and depreciating assets. Here is how it can be further described:

  • Capital works deductions: It is defined as the expense of building an investment property or construction expenditure. This form of depreciation normally spreads for more than 40 years. In other words, it is the duration that ATO claims that a building will last before it will require replacement. For example, if $2000 spent on building a new property, you may make a $5000 tax claim every year for 40 years (2.5 % per year).
  • Depreciating assets: According to ATO, depreciating assets will include items like electric equipment, computers, furniture, and motor vehicle, among others. For property investors, the depreciating assets will include items like stoves, light fittings, carpets, or even the rubbish bin. ATO has specified all the items that you will be able to claim and for how long when you prepare your property report. It is also known as the effective life by ATO according to which this is how long the assets will last before it will need replacement. For instance, a carpet’s estimated lifespan will be 10 years, the kitchen stove’s life will be 12 years, and the bin’s life will be 10 years.

How you may claim depreciation?

You will be able to claim depreciation using two methods namely the prime cost method and diminishing value method. The prime cost method provides you an equal tax deduction every year over the item’s effective life. Meanwhile, the diminishing value method will offer you bigger claims in the initial years of the item’s effective and smaller claims gradually. A large number of investors opt for the diminishing value method as it provides them with a higher depreciation rate in the beginning. If you face some confusion, your accountant will give you advice as to which method will work best for you.

Conclusion:

The aforementioned details will give you an adequate idea of how depreciation will work for a new property. It is ideal to hire an expert quantity surveyor who will be able to prepare your tax depreciation schedules in an effective manner. They have expertise in identifying the value of construction work. They can also offer you a report on the depreciation rate that will be claimable on your property and when you may claim it. You will then send this report to your account who will claim it on your tax return.

What Tax Deductions Can I Claim When I Am Working From Home

Working from home has become the new normal. The major advantage that it offers is the greater level of flexibility. However, there is one thing that has no flexibility: no matter where we work from, our tax obligations still remain the same. Did you know that you may be eligible for a depreciation tax benefit for your incurred costs during the COVID situation as well? Yes, you read it right! You can claim certain costs related to work from home obligations. However, it must be noted that this only concerns the people who usually work from an office but due to the COVID pandemic, or any other reason outside their control, are currently working from home. You should also remember that you cannot claim the amount reimbursed in this case.

Methods for Calculating Your Tax Deduction While Working From Home

Taxpayers were generally using two different methods before 1 March 2020 for calculating home office tax deduction, the Fixed Rate Method and Actual Cost Method. And these are still applicable.

But as a result of the COVID-19 pandemic, the Australian Taxation Office (ATO) introduced of the Shortcut Method, which applies to the periods:

  • 1 March 2020 to 30 June 2020 for the income year 2019–20; and
  • 1 July 2020 to 30 September 2020 for the income year 2020–21

According to the ATO, extension in the period is possible. However, this depends on the length of time the pandemic disrupts normal operations.

The ATO depreciation rate under the Shortcut Method is 80 cents per hour. This is for all “running expenses”. While using this method, you must record the corresponding working hours at home.

Methods for Calculating Your Tax Deduction While Working From Home

You should fully do the office work from home and not just the minimal task. The below are items that can be claimed in part as work from home expenses as listed below:

  • Occupancy expenses like mortgage interest, rent, and other costs.
  • Heating, cooling, and lighting – this includes various household utility bills.
  • Home office equipment- this includes computers, telephones, and printers.
  • Work-related phone calls – this includes phone rentals or mobile usage for office work purposes.
  • Internet usage
  • Depreciation in the value of furniture and fittings – you can claim for furniture such as desks and cupboards which are used for home office.
  • Depreciation of office equipment and computers

It is always advisable to consult an expert for all the tax-related matters concerning the common tax issues and especially about the tax depreciation schedule for rental property.

Is There a Need to Follow Any Tax Depreciation Schedule While Working From Home?

With the short cut method, it is not required. In other cases, an accountant can help in calculating the depreciation value. But if you are running a business from home, an expert can guide you in preparing the federal tax depreciation schedule.

What Are the Capital Gains Tax Implications When You Work From Home?

If you are working from home, you do not have any capital gains tax (CGT) implications for your home. This applies when you run a business from home.

Conclusion

Today more people are working from home however, facing certain expenses that weren’t in the picture during the regular times. You can follow the above procedures for achieving the depreciation tax benefits. Understanding tax claims is a challenging process but, the shortcut method gives you a simple calculating option. All you need to do is maintain the record of your working hours and expenses. If in any doubt, contact a tax expert for advice.

Can I Back-claim for Depreciation on My Rental Property?

Did you own a property for several years but fail to claim depreciation? If so, this unfortunately also implies that you must have over-paid your taxes for all these years. You can heave a sigh of relief as you can claim back over-paid amount from ATO when you prepare your property depreciation schedule. However, your earlier tax lodgements and personal situation will decide how many years’ tax you can back-claim. You should also seek advice from a professional who will give you detailed information on this front.

How Many Years of Depreciation will you be able to Back-Claim?

As per ATO rules, the law has set some limits for amending your tax assessment. The time limit has been set for two years for individuals and small business organisations. For other taxpayers, the time limit is four years. And the time limit will be calculated as:

If you are a sole trader and get notice of assessment on November 12, 2017, the two-year amendment duration begins on November 13, 2017. It will end after two years on November 12, 2019. You must take everything into consideration when you decide to lodge an Australian tax return.

Amendment Request

You will be allowed to file more than one amendment request within a period of the review. It also implies that individuals are permitted to amend nearly 2 years earlier tax returns. If you happen to be the beneficiary of a trust, four years limit for amendments will apply. Additionally, all remaining entities like trusts, organizations, and self-controlled super fund may amend tax returns lodged in the last 4 years as a standard. Depreciation residential rental property helps in reducing your tax liabilities to a considerable extent.

How to Back-claim for Earlier Years’ Depreciation?

When you desire to back-claim for earlier years, you should file a request for an amendment to the ATO. The ATO will not be charge any fee in case you request an amendment. Additionally, you will not be required to send yet another tax return unless and until they ask you to0. You will be able to request an amendment in several ways. You should get in touch with an accountant as they have the expertise and can execute it with the least effort. We can cite an example. For instance, you bought a 2 years old investment property in the year 2017. But you were not aware that you could benefit by claiming depreciation. The good thing is that you will be able to request amendments for your 2019 and 20219 tax returns. You can also claim deductions in your 2020 tax return and in the coming years as well.

Conclusion:

You may claim depreciation for the years that you failed to claim. It is worth noting that ATO permits you to backdate depreciation by two years in several cases. You should evaluate all these factors prior to calculating your rental home returns. Also, properties constructed during various time periods must be claimed according to different available methods. There is no one set method for all the properties and, depreciation percentage will be calculated on the basis of the date when construction commenced on the property.

Why you Need a Depreciation Schedule when the Construction Cost is Known

As the financial year comes to an end, it becomes imperative to get your depreciation ATO tax depreciation schedule sorted. You gain several benefits of securing a depreciation schedule prior to June 30. It will help in enhancing your return and make the most of your investment. It is worth noting that a quantity surveyor report also consists of a schedule of depreciable assets also known as capital allowances. Meanwhile, a different deduction for the fall in the value of depreciating assets in a rental property can be claimed.

Given below are some of the points that you must be aware of the depreciation schedule:

1. Depreciation deduction:

The Australian Taxation Office permits the property owners to seek a claim for depreciation or fall in value as a deduction. Depreciation has been categorised as a non-cash deduction thus meaning an investor won’t need to spend money to be able to make a claim. It is for this reason that depreciation deductions are ignored. And, it becomes an expensive mistake for investors as depreciation deductions present huge taxation advantages. When tax time arrives, property owners should ensure they have claimed all the deductions for which they are eligible. Income-generating property owners must seek claims for property depreciation tax deduction linked to the structure of building along with plant and equipment assets.

2. Claim cost of schedule:

A depreciation schedule has got a one-off expense that continues until the life of the property or for forty years. It will ensure that the owners have claimed their respective depreciation entitlements precisely.  It is worth noting that the cost of the depreciation schedule is 100% tax-deductible. One of the major benefits of securing a depreciation schedule prior to June 30 is that investors can claim the fee straight back that financial year. Investors must estimate tax returns in a precise manner.

3. Partial year claims:

In the case that you purchased an investment property and are waiting for the next financial year for claiming a deduction, you may miss considerable savings. Investors will be able to claim partial year deductions for the tenure in which they acquired their properties before June 30. The depreciation values of assets are precisely adjusted in accordance with the period during which it was owned. For instance, if the property was owned or rented for six months, the owner can get 50% yearly deductions.

Conclusion:

Investors must arrange a depreciation schedule at their earliest convenience. Deppro quantity surveyors have expertise in preparing depreciation schedules that save our clients lots of money.

4 Commercial Property Depreciation Facts You Must Know

Many commercial property owners aren’t aware that they are eligible to claim depreciation on property. According to a study, approximately 80% of investors miss the benefits of their commercial property and end up losing plenty of money every year in Australia. It is imperative for all commercial property owners to claim depreciation. These deductions can significantly enhance the positive cash flow of an investor and diminish the negative cash flow. We have prepared a list of significant factors that property owners may consider in a bid to earn more from their commercial property.

Given below are the factors about commercial property depreciation:

1. Depreciation and how you can claim it:

According to the ATO, it is necessary for investors to prepare a report of their income-earning from their commercial property. This will prove useful when preparing their income tax assessment. And, property investors of commercial property are eligible to claim depreciation. Depreciation takes place when a property shows signs of wear and tear in its structure, fixtures & fittings over the years. It is considered to be a non-cash deduction which means that investors must not spend any amount to claim it. Property investors must calculate depreciation on rental property in an accurate manner to maximise their claim.

2. Life of a building:

Property owners will also be eligible to claim any latest renovations that took place since July 20 1982 snd, it doesn’t matter if it was carried out by an earlier owner. Additionally, plant and equipment depreciation can be claimed as well, irrespective of age. The instances of plant and equipment may include carpets, and ac units, among others. Expert quantity surveyors will carry out a property inspection and take images and prepare a list of additions made to the commercial property. They will offer an itemised tax depreciation schedule to property investors that include the availability of deductions for a period of 40 years. You may seek a Deppro review from our professionals, in case you encounter any confusion.

3. Depreciation of other items:

While preparing a commercial building property depreciation schedule, it may be tough to work out who is eligible to claim depreciation for specific items. Landlord and the sitting tenant will be able to claim depreciation for any fit-out made to a property. Tenants of commercial properties will be eligible to seek a claim of depreciation for any fit-out that they introduced. It may include blinds, shelving, and carpets, among others. Additionally, owners of a commercial property can also claim depreciation on any installed asset or assets left by a previous tenant.

4. Select a method:

After calculating depreciation, property investors may choose two methods for making a depreciation claim. This includes: diminishing value method and prime cost method – property investors can use either. Deductions will be calculated according to a percentage of balance you leave to subtract under the diminishing value method. Meanwhile, the deduction for every year can be calculated as a percentage of cost under the prime cost method.

Conclusion:

You must be aware of how to calculate depreciation for your commercial property accurately to maximise your gains. If you face any difficulty in calculating depreciation, use our Deppro contact number, and call our experts. They will help you calculate it accurately. You may consult their quantity surveyor as well who have achieved specialisation in tax depreciation.

Top 4 Tips for Maximising Depreciation Deductions in Your Hotel

When one mentions the word hotel, what springs to mind? Cozy rooms, tasty food, well-stocked wine cellars and men and women trying to make their guests comfortable. But behind the scenes, hotels have a lot of wastage (electricity, water and food). This wastage reduces their revenue and income. While hotels might look glamorous on the outside, they too need to save every dollar behind the scenes. One of the less known but very effective ways for hotels to save their hard-earned money is by filing the correct Australian tax return. This blog will tell you four easy ways to legally reduce your tax outlay for your hotel.

Hotel Depreciation Schedule

In case you are in the process of buying a hotel now, then the complete inventory of its assets would already have been made earlier. But you need not lose out on the available tax deduction on account of depreciating inventory/assets. You can still employ the services of a certified quantity surveyor and create a federal tax depreciation schedule. The assessment of different assets of a hotel is more complex than that for a residential property. The assets which qualify as ‘plant and equipment’ in a hotel have a separate listing in the ATO Depreciation rates. That is why a competent quantity surveyor can ensure that any claim you are eligible for doesn’t get missed out on. The quantity surveyor would also ensure that you do not pay tax for the same asset twice.

Make your renovations count

A hotel always needs to look its best at all times. That is the reason hotels undergo renovations or refurbishments quite frequently. As a hotel owner, you need to make sure that your depreciation schedule stays updated always. To ensure this, keep your quantity surveyor informed whenever you are planning an activity. They would advise you what to do with the assets you are replacing, and how to list it in your property report. Many hotel owners make the mistake of sending discarded items/assets to scrap. While the renovation is in full swing, keep your discarded assets aside, and also list out all the new fixtures and fittings being installed. At the end of the refurbishments, the quantity surveyor will make an overall assessment and update your depreciation schedule.

Try to stay within the industry

Like we mentioned before, hotels in particular and the hospitality industry in general, are quite different from others. While looking for a quantity surveyor, try to engage one who has extensive experience with hotels. That way, you will not need to explain your peculiarities to him, and he can easily understand your industry lingo.

Different treatments while buying new

We spoke earlier about situations where you are purchasing an existing property. If you do have a new hotel purchase, then you need to consult your quantity surveyor about how best to treat your assets. This will help you maximise your tax deductions and save money.

Conclusion:

If you are buying a hotel or own one, please make sure you get the best possible benefits of tax deductions on account of the depreciation of your property.

10 Commonly Overlooked ATO Tax Deductions

Taxes are especially painful to small and medium sized enterprise owners. Neither do they have the scale of a large company nor the agility of a startup. But the tax rules are equally applicable to such business owners. This is the reason such business owners often fret about their tax burden. If you are one such person, you should be happy to know that we have good news for you. There are several legal tax deductions that are allowed by the Australian Tax Office.

List of the Commonly Overlooked ATO Tax Deductions

Here is a quick list of Australian tax depreciation and other allowed deductions:

  1. Any new or second hand assets purchased for your business can help reduce your taxable amount by as much as $20,000 AUD. This is different from the fixed assets listed on your property depreciation tax deduction.
  2. Any Union fees paid can be reduced from taxable income under the D5 clause.
  3. All donations of $2 AUD or higher are actually eligible for exemptions. The conditions are that these contributions are made to charitable organisations.
  4. If you operate your business from home, it can provide some relief as well. Remember that this is different from the tax relief your home can provide in your tax depreciation schedule. Here we are talking of the occupancy cost that you incur for running your business from your home. Your expenses on printers, computers, and even licensed software could be claimed under this head. The only condition is that they have been used solely for your business.
  5. In case you are paying any insurance premium, there might be good news for you. This depends on the kind of insurance taken. It should be a policy to prevent loss of business income. Other regular insurance policy premiums cannot be claimed, though.
  6. If you are educating yourself or upgrading your knowledge, the expenses are protected under the ATO rules. This would include expenses like textbooks, professional journals, related travel etc., just to name a few.
  7. This is a good one. If your work is mostly outdoors, and you spend a lot of time in the sun, then there is something for you as well. All expenses on sunglasses and sun shades are considered as expenses made for the protection of your eyes, and can be claimed.
  8. As a business owner, connectivity costs are very vital but sometimes can be quite steep. No business owner can survive without spending money on internet connection at all times, or on mobile phone expenses. The good news is that these too can be claimed.
  9. Say you have employed a tax consulting agency to help you prepare your investment property depreciation schedule ATO. The expenses on fees etc. can also be duly claimed as legitimate business expense.
  10. We’ve left the scary one for last – no business is ever insulated from the bad times. In case your business suffers financial losses in any year, the tax rules also allow you to claim relief on those losses. That’s what they call a silver lining for a dark cloud.

Busting the 7 Myths of Depreciation Schedules

When it comes to tax depreciation, many myths have been floating around specifically regarding what property investors can claim. As you are aware, tax depreciation can benefit any person with an investment in assets or property. And, there are many who are not aware of the depreciation rules for rental property. You need to work out how much your investment property depreciates to claim these values during tax time. A tax depreciation schedule helps in making your rental property work for you. Here are some common myths of depreciation schedules below:

Myth#1: Commissioner’s actual life ruling needs to be utilised for all assets without any exception

Truth: The Commissioner of Taxation’s ruling is only applicable to the new depreciable property. The role of a quantity surveyor is to boost the depreciation deduction for his client. In order to achieve this, he must calculate the actual life of the second-hand assets. He should not assume that all the assets available in the property are brand new. If the asset is depreciable, you can always claim it.

Myth#2: If the assets in the property get damaged, you won’t be able to claim the balance of depreciation

Truth: Division 43 capital works mentions that if taxpayer’s capital works get damaged, the deduction will be available under Undeducted Construction Expenditure.

Myth#3: On the recovery of a depreciable asset, you can claim depreciation on it

Truth: As many investment homeowners use their property at some stage during the year, incorrect figures may surface in their tax depreciation schedule. The main motive of a tax depreciation schedule is to notify the taxpayers on what they may include in a tax return. It may be illegal or misleading if you don’t check whether or not the property was used for private purpose. You must figure out how to adjust the depreciation amount to the right sum.

Myth#4: All the expenses in obtaining a rental property will be able to get depreciated

Truth: The quantity surveyors consistently find any asset to link any and all expenses to claim a deduction without following the laws. It is wrong. You should claim a repair 100 percent only in the year in which it took place.

Myth#5: Once you have spent money on an asset or a capital work, you are eligible to claim it

Truth: As per Division 40, you should start depreciating the asset only when it is ready for use or already used. You should not start to depreciate it from the exact moment when you purchase it.

You can claim deductions only once construction gets over for capital works under Division 43.

Myth#6: If you can’t find depreciable assets in the Commissioner’s yearly ruling, you won’t be able to depreciate it

Truth: The purpose of the Commissioner’s ruling is to assess the exact lives of assets. Not to calculate what is a depreciable property. A depreciable asset is an investment property with a limited effective life. And, they may dip in value with time. Make sure that you are aware of the ATO property depreciation rules.

Myths#7: Your assets get deducted consistently at a 2.5 percent rate

Truth: The rate at which assets get deducted almost always remains at 2.5%. But, at one point of time, you can get a 4 percent rate. The 4 percent rate will be applicable on the income-producing usage of a building with regard to an industrial manner.

Conclusion:

You can seek the help of a quantity surveyor to prepare a detailed house depreciation report. The quantity surveyor will not only help in busting your myths but also maximise your depreciation deductions.