A General blog by Paul Bennion.

Recent comments from The Reserve Bank (RBA) indicate that official interest rates in Australia will remain low and stay low for a considerable period of time.

The operative phrase being used is ‘stability in interest rate settings’ which means that there is unlikely to be any upward movement in interest rates for some consideration period of time.

In particular, softer-than-expected reading of first-quarter inflation after the surprise jump in consumer prices in the three months of last year have given the RBA more leeway in leaving the cash rate on hold for an extended period of time.

Financial markets have also wound back their rate hike expectations. While markets were pricing in an 88 per cent chance of a 25 basis points rate hike over the next 12 months in early April, they priced in a lower 44 per cent chance according to recent figures by Credit Suisse.

This trend of stable and low interest rates is underlined by the latest meeting of the RBA which decided to keep official interest rates at a record low of 2.5% for the night consecutive month following its May 2014 meeting.

However, while low interest rates means that the cash flow of investors is boosted, it also can mean that the negative gearing benefits associated with owning an investment property are reduced.

Negative gearing historically been used by taxpayers to reduce their tax bill and create wealth through property investment.

In particular, high income earners have been attracted to buying investment properties due to the negative gearing benefits it offers. With interest rates falling to near record lows, investors now have to look to other tax benefits associated with holding property such as tax depreciation.

The tax benefits associated with tax depreciation can be very signification with DEPPRO clients achieving tax benefits obtained through depreciation equivalent to 60% of the total purchase price of the property.

Many investors in Australia totally underestimate the number of items that can be depreciated for tax purposes and this comprehensive list can even include garden gnomes, cubby houses and if they own an apartment, then common areas such as car parking and recreational facilities.

To qualify for these legitimate tax deductions, an investor must have a fully compliant tax depreciation company undertake an onsite inspection of the property and then compile a depreciation report based on this inspection.

Depreciation is a complex area of taxation that requires a professional company to undertake a depreciation report because of constant changes in rules.

The ATO is now taking a more aggressive approach to tax deductions made by residential investors and has asked a large number to provide more details about their claims relating to property investments.

Property investors should check that the company undertaking their tax depreciation schedule is a member of the The Australian Institute of Quantity Surveyors (AIQS).

Employing a company who is a member of AIQS such as DEPPRO gives protection to consumers that their tax depreciation report complies is completed in a professional manner.