A Finance blog by Paul Bennion.
Property Investors in the Sydney market have the most to gain financially from tax depreciation because of surging prices in the city over the last year.
The latest figures produced by Australian Property Monitors show that the median price of a home in Sydney surged by 16.9% over the past twelve months to $782,973 – the fastest price growth rates in Australia.
As a result, the median house price in Sydney is more than $160,000 higher than the average price of a home for all capital cities combined.
These higher house prices mean that relatively, property investors in Sydney can obtain higher dollar tax depreciation benefits compared to property investors in other capital cities.
This is because tax depreciation benefits can account for up to 60% of the property price of a property.
In Sydney, this can mean potential tax deprecation benefits of nearly $470,000 for someone buying an average priced property in Sydney for investment proposes.
This compares to Hobart, where the median house price is $325,741 and someone buying an average priced property could potentially receive tax depreciation benefits of nearly $200,000.
It therefore makes financial sense for any investor buying a property in the Sydney market to utilise the generous tax depreciation benefits associated with owning a property.
An investor can claim these tax benefits by using the services of the tax depreciation specialist such as DEPPRO who prepares a tax depreciation schedule.
This depreciation report itemises the age of the property, what materials it is built from, the internal fittings such as carpets, window treatments, appliances etc. An estimated value is placed against these various items and they are depreciated depending on their age and value.
The investor gives this report to their accountant and this is used by them to work out how much tax benefits they can obtain each year.
You only need to do one depreciation report for a property and it can be updated each year by the accountant if the investor for example, installs a new kitchen.
Most properties regardless of their age can offer investors substantial tax benefits through obtaining such a schedule.
If you don’t obtain a tax depreciation report then you cannot claim for these substantial tax benefits as the Australian Tax Office requires such as report to ensure that the investor is making legitimate claims.
To protect their interests and ensure that they select a company that is fully compliant with ATO rulings, members of the public should select a company that is a member of The Australian Institute of Quantity Surveyors (AIQS).
AIQS is the professional standards body for quantity surveyors throughout Australia and enjoys a close working relationship with the ATO.
For depreciation professionals, having the appropriate training and qualifications and being a member of organisations such as the AIQS is critical in ensuring you can provide the best advice for your clients.