The one depreciation law change you absolutely need to know

The 2017/18 Federal Budget brought about some changes that directly affect investors looking at properties to buy in the future. Starting from May 9th 2017, the ability to claim depreciation on certain assets has changed.

From July 1, 2017, the Government will limit plant and equipment depreciation deductions to outlays actually incurred by investors in residential real estate properties.

So what does this mean?

When you buy a property from a previous investor, you can’t claim the plant and equipment deductions. Capital works aren’t affected, so you can still earn money back from this.

Plant and equipment are the ‘easily removable’ items located in the property such as bins, white goods and any other furniture that you bought for the home. Remember  that anything $300 or less can instantly get written off as an expense.

I bought a property before the May 9th announcement

Then you’re in the clear. You can still claim plant and equipment depreciation if you settled the home before 7:30 pm on May 9th.

If you settled after, then unfortunately you’re out of luck. It doesn’t matter if those taps or that couch are a few months old. To claim, you must ‘incur the expense’ yourself.

So what CAN I do?

Capital works depreciation is still claimable, so investor’s don’t totally lose out. You can also pay less capital gains tax when the property sells for a profit. Simply subtract the resale value of the plant and equipment from the time of purchase to how much it’s valued by the time you sell.

Purchase value – resale value = CGT offset

Investor’s won’t have to do the maths themselves, however. The quantity surveyor writes these calculations on the depreciation schedule.

Do I need to rethink my investment strategy?

You certainly need to scrutinise potential purchases a lot more closely. Your aim is to generate income from a rental property, whether commercial or residential. There’ll always be a debt and recovery period before you make a profit. With the new law changes, investors will look at new homes now more than ever over second-hand properties.

tax return

This is how to get your best tax return yet

Tax-time isn’t something to fear if you have your affairs in order. At the end of it you get something even better: a tax refund! The ease of filing your your tax return depends on you and how you handle your affairs. The amount you get back depends on what you know you can claim. We have some advice to help you handle both.

Deppro handles property depreciation reports, not tax, but we know a thing or two about the latter. ‘Tax depreciation’ is the same thing as property depreciation. It’s part of your annual taxable income.

The cost of a depreciation schedule is actually fully deductible, along with whatever depreciation amount you can claim that year. That’s more money going back into your bank account!

Investment property is a source of income, and you must list it on your tax return. Depreciation is the ‘extra’ essential that can push you further to your goal. Imagine paying off your loan or now having the potential to buy another property. Depreciation earns investors tens of thousands of dollars over the time they hold the assets in their portfolio. That’s just for one property. Imagine being in the 1% club and having six or more.

To get your best-ever tax return, you need your accountant on your side. You would’ve handed over your tax depreciation report to them, anyway. It’s their job to file a return that gets you the best amount back possible.

Before you meet with them, it’s possible to estimate how much you’ll get back. The ATO releases a new edition of their tax return estimator every year, and it’s free to use. You need:

  • Your PAYG statement (for gross income and tax withheld)
  • A list of your tax offsets and what you can claim
  • Calculation of your Medicare levy
  • To know your residency

If your numbers are accurate and you have the correct information, what you get from your accountant won’t be much different. If at all.

To get your best-ever tax return, you must be organised. When the end of financial year comes, you need these tools in order to claim:

  • Your accountant
  • PAYG statement
  • Depreciation report
  • List of tax offsets

Not all tools are free, but they pay for themselves in the end thanks to that amazing tax refund!

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.

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.

investing in property

Avoid emotional fallout when investing in property with these tips

There’s never one, simple reason for investing in property. Buyers might want to add to an existing  portfolio, start a renovation project, or have a home to rent out for holidays. Humans are only, well, human and emotions sometimes run high when it comes to property.

Avoiding emotions is difficult; you can’t shut them off completely. When you get something you want it’s natural to feel happiness, even elation. But the opposite is sadness and downright devastation. First-time investors and buyers are most susceptible to this because they lack experience in the area. The emotional burnout of hunting for properties and attempting to invest, only to get rejected, is severe.

Seasoned investors have gone through the initial roller-coaster of emotion and know that they’re investing in property for their potential tenants, not themselves. Investors have the experience to analyse properties with a near ‘clinical’ eye. They categorise the positives and the negatives of the home, whether it fits the profile of their ideal tenant, and if it will generate any income.

One way to deal with the emotions, and all the highs and lows that come with them, is developing  a business mindset. Take the personal bias out of the equation and ask yourself: “what would an investor do?” Don’t go about investing in property because you hope to move into it  one day or it fits the mould of your dream house. Your tastes, great as they are, don’t suit everyone.

Another way is to get the professionals on your side. The buyers agents and property specialists at your bank are unbiased and will honestly say if a particular home is a smart buy. When you’re looking at property for investment, you want to buy a place that generates income. It’s not pleasant when a depreciation specialist comes back with a report saying you basically purchased a money pit.

Emotions are fine, but emotional fall out is not. Avoid making irrational decisions by changing your mindset and getting the professionals on your side.

depreciation on investment property

Depreciation on investment property makes life easier

Investors and business owners order depreciation on investment property so they can efficiently handle expenses. Many investors, though, don’t know about depreciation and how it can make their lives easier. It absolutely pays off financially, and there’s other perks as well.

Most people don’t think about taxes everyday, but the professionals do. Ordering a depreciation report on investment property removes a lot of guesswork and takes the pressure off their minds. Thanks to the experts, they can make accurate deductions for the time they own the properties in their portfolios. Deppro’s reports last forty years, long enough to hold the property and sell it on.

Access to a depreciation schedule is easy for any investor, whether they’re just starting out or played the game for a while. Companies like Deppro exist to help people at any stage of their investment game. They’ll explain how the report works, how items are categorised, and what to do after the clients get the depreciation schedule in their hands. This makes life easier, especially for newcomers, because the experts are taking care of everything.

When you ask the experts for help with depreciation for investment property, you’re also getting an education. Deppro guides their clients through the process of ordering the report and how to use it to maximise deductions. You’ll also learn what a quantity surveyor does, and what items will fall under ‘capital works’ if you ever renovate your property.

When you get expert help for depreciation on investment property you’re making less work for yourself. You get a depreciation schedule that lasts for decades and saves you worrying about accurate numbers. The report, and the expert help that comes with it, is accessible to anyone at any stage of building a portfolio. You’ll also learn a few things along the way, like how to use the report for taxes, and whether you can claim the new carpet for the office as a deductible expense (yes, you can).

tax return

What everybody ought to know about tax depreciation

There’s experts out there, like Deppro, who efficiently handle tax depreciation so their clients can get the best possible return. Seasoned property investors know about tax depreciation and how to claim deductions every year. This article is for the first-time investors wanting to get in the market, but not quite able to wrap their head around depreciation.

  • It’s a claimable expense

Tax depreciation is deductible from your income, giving you a greater tax return.

  • You need a depreciation schedule

This is absolutely necessary so investors and business owners can claim the maximum amount over time. Depreciation schedules begin from the settlement date and estimate the value of taxable items over their useful lifetime.

Getting a depreciation schedule takes the guesswork out of evaluating items in your property as the years pass. Quantity assessors, like those who work for Deppro, will do an inspection. The depreciation company uses these to write a report and a depreciation schedule. These are delivered to the client within the month. This often overlooked information helps investors significantly boost their returns.

  • You can buy more properties

The money earned back from tax depreciation lessens the debt investors take on when they buy property. It’s common for them to use the extra funds to expand their portfolio. Once they do, they repeat the process of getting a depreciation assessment.

  • The report isn’t an annual thing

The quantity surveyor will only need to visit the property once. They’ll take pictures and make notes before heading back to the office and drawing up the report, outlining the values of the items they see. If you do renovations on the home, though, you will need to update this report for an accurate schedule. You’ll get in trouble with the ATO if you make a claim with false information.

  • ATO approval

The depreciation schedule must come from a registered tax agent so that it complies with guidelines from the ATO.  Deppro’s quantity surveyors are educated, accredited, and take pride in providing accurate reports.

real estate

How your depreciation schedule give you bragging rights

Having a depreciation schedule isn’t anyone’s idea of a ‘must-have accessory’ but it pays off in more ways than one. Seasoned investors and business owners with several properties under their belts know well the bragging rights they’re afforded when they’ve got the depreciation schedule in their hands.

It’s less work
Tax time is the bane of most people’s existence . Organising account information, making sure expenses are correct and the like is a pain if you’re not organised. When you own investment properties, or brick-and-mortar stores, the amount of work increases substantially.

This is where the depreciation report comes in. After the quantity surveyor does their walk through and the company mails you the report, a large bulk of the tax reporting for those properties is complete. You don’t have to triple-check bills or receipts for a long time unless you do renovations.

It lasts for a LONG time
Ordering a depreciation report isn’t an annual task. It’s valid for the lifetime of the property. Companies like Deppro create reports that last forty years, so you’re set for life, or at least as long as you have the homes/shops in your portfolio.

This means, though, you must act quickly. As soon as you settle the deal with the real estate agent, get the depreciation experts in to assess. They prefer to see everything in the condition you bought it to make an accurate report. If the previous owners made renovations, then that’s a bonus as you’re eligible to claim their work in the report!

More (money) for you
The biggest bragging right of all? You’re paying less tax! Because you got the depreciation report done and passed off to your accountant in record time, there’s more money flowing back to you come tax time.

Fun fact: the fee for ordering the depreciation schedule is deductible.

A depreciation report isn’t glamorous, but its benefits are worth their weight in the size of your tax return. You can feel a little smug having less work on your plate organising expenses. Your accountant has the report, and you have the time to run your business.

property depreciation

How to get on top of property depreciation

Property depreciation is a crucial part of managing your taxes and rental property. If you don’t do it, you’re missing out on cash – lots of it. So how does one get on top of their tax depreciation?

First thing’s first: get an expert. Companies like Deppro prepare depreciation reports/schedules that are ATO compliant. Their staff evaluate items for their lifetime value and prepare the report, detailing how they will decrease in value over time. Things in and around the home fall into two categories: plant and equipment, or capital works

Second, get the expert to come as soon as you settle with the real estate agent. Quantity surveyors work best when they see the items in the condition you bought them. If the previous owner has done renovations, you can claim deductions on their work! The ATO will only accept a property depreciation report created by a quantity surveyor, not an accountant. This is because they’re the most qualified to do it. You wouldn’t expect someone who estimates material costs for a living to write your tax return.

That said, the third step is to get your accountant on your side. They help you with your tax return every year, making sure you’re not missing anything you’re eligible to claim. The accountant will treat the property and depreciable items as another asset to claim. They’ll need the property depreciation schedule to properly write out the returns over the years.

Another helpful way to get on top of property depreciation is to make  sure you’re buying a property that will pay for itself over the years. A house or apartment that’s recently renovated and meets the criteria to generate high rental income is ideal.

Property depreciation is difficult to wrap your head around. To get on top of it, it’s absolutely necessary to call in experts like Deppro not long after your settlement. When you’ve got the depreciation schedule in hand, you’re set for life, or at least the next forty years.

Record slow down in rental growth highlights needs for investors to boost cashflow through claiming their depreciation benefits.