Did you own a property for several years but failed to claim depreciation? It 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 lodgments 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.
Given below are vital details that you must consider when you back-claim depreciation on your rental property:
How Many Years of Depreciation You Will Be Able to Back-claim?
As per ATO rule, 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 organizations. 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.
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 charging 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 to. 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.
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.