Depreciation can never be a sole factor for an investor to construct a new investment property. However, it does impact the cash flow of your property. Not to mention, an expert quantity surveyor will help you discover depreciating assets for tax purposes. Investors generally demolish their family home to construct a duplex and live in one part and rent out the other section. It may cost a little more to construct a duplex than a solo freestanding house. But it is more economical than constructing two single freestanding houses.
Here are some factors that you should not overlook:
What is a duplex?
It is a residential home that has got two units under the same roof. The two units however share a common party wall that separates the building into two different units. Each unit is considered as a separate home with its own facilities, entrance, and yard. With a duplex, there is the advantage of a greater asset portfolio and higher equity. It can help in funding future projects and lets you accomplish your property goals much earlier.
Steps in constructing an investment property
There are various steps that need to be followed when constructing an investment property. You must ensure that you have acquired experts. The house that you seek to demolish should be a primary place of residence. It should not be a family home. You need to demolish it as the duplex must be constructed on vacant land. The investor must have a scrapping report which will let the investor claim depreciation on investment property. This report will help you to save thousands of dollars by way of claiming an instant tax deduction for scrap value being decided by an expert quantity surveyor.
An expert architect will help in designing the home for the property investor. They should also help the investor through the essential development application process with the council. In case the investor plans to construct an off the plan house, a Complying Development Certificate can be utilized instead of a DA. This will help to streamline the procedure and reduce the lag time. You must evaluate depreciation on residential rental property in a bid to make an effective depreciation claim.
During the process of construction, you must establish contact with the builder so that you can stay updated on the construction progress. You must ensure that the construction team are experts who have a license and previous experience. It will ensure a top-quality final product. After the project is over, it is necessary to get hold of an occupation certificate. The certificate will help in authorizing the occupation and use of a new unit. It is significant because it will ensure that the property becomes habitable.
Often financial institutions or banks may make it mandatory to seek the services of quantity surveyors. An expert quantity surveyor from Deppro Victoria will also prepare the property tax depreciation schedule for the property investors. The cost reports are required by banks to understand the development expenditure.
https://deppro.com.au/wp-content/uploads/2020/06/AdobeStock_120077071.jpeg12131500adminhttps://deppro.com.au/wp-content/uploads/2017/04/logo-deppro-final-300x140.pngadmin2020-09-23 06:22:282020-09-23 06:22:28Planning to demolish your existing property to construct an investment property? Consider these factors
One of the most popular trends in the real estate world recently is co-ownership. A rising number of property investors are choosing to own properties together, and there are some great reasons behind it. Co-ownerships of properties are increasing the purchasing power, which is particularly significant in large cities. Co-ownership also relieves the burden of maintaining a property. The cost of repair and maintenance could be carried by multiple parties instead of one person.
But beyond all of this, co-ownership can also assist in claiming depreciation on property, giving a chance to depreciate more assets at a higher rate. Let’s understand how this works.
What is a split report?
A split report, as the name suggests, splits the value of the assets in proportion to each co-owner’s interest. We calculate depreciation on rental property or private property only after the split. Thus, a split report allows for tax depreciation based on the interest of each co-owner, instead of an aggregate depreciation.
The rationale behind the idea is quite clear. As we know, tax depreciation is a process where the depreciation in the cost of assets within a property is considered as another expense, thus allowing for larger tax returns. When a split report comes into the picture, the distribution of assets too is made according to the percentage of ownership of each co-owner. This increases the number of assets eligible for a write-off or a low-value pool.
The whole tactic accelerates the depreciation benefits for the co-owners, making it a very profitable technique in the early years of property ownership.
Scenarios where split report works
A split report is applicable wherever there is a scope of claiming tax depreciation on the assets of your property. Let’s try to understand how multiple owners are better than a single one.
Consider a scenario where property investors are allowed to receive a write-off on assets that have a starting value of $300 (or less). Typically, this severely restricts the write-off a single owner could get on a property. However, in the case of co-ownership with an equal partnership, each owner is allowed to claim a write-off on items with a value of less than $300. This means that the co-owners can collectively claim ownership of $600 value.
A similar tactic could be employed in case of low-value pooling. Suppose that if the interest of the owner for any asset is less than $1000 in value, the asset would be considered low-value. The owner gets a Deppro contact number and gets told that he could claim them at a rate of 18.75 percent in the first year and 37.5 percent from second year. However, when there is a 50:50 co-ownership, each owner is allowed to claim assets with interest less than $1000, thus allowing to put a total claim worth $2000.
Asset depreciation is a significant tax deduction for property owners, something to consider during a Deppro review. However, this is far from the only benefit that co-ownership offers. If you are looking to invest in a property, doing so with others can hold some long-term benefits for you. Contact us today to chat about your options.
Do you know that you can improve your cash flow with estimate tax returns? This happens because depreciation essentially lowers taxable income which means you can foresee more precisely and put more money in your pocket at tax time. When people get this extra cash in their pocket, they tend to put this money into savings, buying a property, car, going on a holiday, or even put it towards the daily living expenses. But if you are an investor and want to use this extra cash in smarter ways, here are few options for you:
1. Pay Your Debts:
It is always best to do the necessary things rather than buying a new car etc. If you have any major debts, this is a very good chance for you to reduce or eliminate them.
2. Expand Your Portfolio:
Your financial advisor will tell you that modifying or diversifying is a great way to reduce risk and is important for your long-term financial success. When you have a modified portfolio, different investments are likely to react differently to the same event; which means, if one of your areas is suffering, you will still have another area growing. This will save you from a significant financial loss.
3. Invest in a Renovation in Your Properties:
It is always a good idea to keep your investment property prim and proper. Try to invest in high quality appliances and change the overall look with a fresh coat of paint. Using this extra cash from property depreciation tax deduction to improve your current investment property is a nice idea. Renovations obviously also boost rental returns and increase the overall property value.
4. Expand Your Business:
When you are a commercial property investor or in a business of a tenant, extra cash never goes in vain. Depending on how your business is travelling, you can use that extra cash to expand the horizon. It means expanding the business or investing in other properties for business. For example, you can buy new properties and equipment for new properties.
5. Grow Your Portfolio:
As an investor, you should never stop at one property. You will experience greater success and returns by growing your property portfolio. But you have to consider this only if this works for you and your financial situation and fits you right with your investment goals. It is always a good idea to do some research to make sure you are investing in the right area to maximize capital growth and rental returns.
Consult an Advisor
It is important to note that these are only generalized ways to invest your money in better ways. It is always best to consult Deppro quantity surveyors to determine the best course of action for your circumstances.
There are many other ways in which you can boost your cash returns from the tax return you get in your pocket. However, you need to go through the ATO tax depreciationschedule for a detailed picture.
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Before you purchase a property from an investment point of view, your accountant or your rental property manager will always advise you to consult a quantity surveyor, especially when dealing with depreciation tax deductions. A quantity surveyor specializes in estimating the value of your assets for depreciation purposes. But before you deal with a quantity surveyor, you need to learn certain facts about them, which are discussed below:
1. Quantity Surveyors Are All Acknowledged by the Australian Taxation Office
As mentioned in the beginning, a quantity surveyor is acknowledged as a professional who is eligible to estimate your construction cost that can be eliminated for tax depreciation. A quantity surveyor specializes in preparing tax depreciation reports for you. They can come up with a comprehensive tax depreciation schedule that outlines all the deductions you are eligible to claim. Though these deductions vary depending on your circumstance and the type of property purchased, the construction starting date, any renovations that have taken place, and the moment you exchanged contracts to purchase the property.
2. Quantity Surveyors Hold the Required Industry Qualifications
You are advised to do a background check before you appoint a quality surveyor. Make sure he is an authentic tax agent with a registration certificate for the tax depreciation work. There is an appropriate standard of professional and ethical conduct and regulations provided by the 2009 Tax Service Act (TASA) that every tax agent and financial adviser have to obey. The Tax Practitioners Board also says that the quantity surveyors who are preparing the report must be acknowledged by the Tax Service Act 2009.
3. Ask Your Quantity Surveyor All the Questions about Depreciation Schedule
You should opt for tax depreciation quantity surveyors who can inspect the site to estimate the tax depreciation properly. If a quantity surveyor refuses to visit your property, there are high chances that they may miss evaluating some assets and henceforth will not be able to include them in the final tax depreciation report.
A good quantity surveyor will cover the depreciation of all your assets in their depreciation report and will always find a way to help you claim the maximum deductions at the time of tax return. You can always check online for more information on Property Investment returns.
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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.
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.
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.
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Professional tax depreciation organizations can spot several items in an investment property for which you will be eligible to claim valid depreciation benefits. Investment property owners can enhance their cash flow by claiming depreciation on investment property. You should not forget to claim a tax deduction on several household items as it will reduce your tax liability. You will be stunned to find out that even your garden gnomes are allowed to be depreciated for tax purposes. Several investors living in Australia end up underestimating the figure of items that can be depreciated for tax purposes.
Here are some vital details that you should not miss for boosting your property cash flow:
What is depreciation?
Depreciation can be defined as wear and tear of a property and its assets over a period of time. When you claim for depreciation, you are set to claim a tax deduction for loss in value of those assets as they age with time. Depreciation has emerged as one of the biggest tax deductions available for property investors every financial year. It also has the capacity to boost the rental property’s cash flow every year. You must claim for depreciation by using a tax depreciation schedule prepared with the help of a reliable quantity surveyor (QS).
Don’t forget to do your tax return
Depreciation can be claimed in the form of tax deduction in your tax return every year. You remain eligible to seek a claim for it in a similar manner as you claim for insurance, repairs & maintenance, property management fees, etc. The major difference from the other claimable expenditures is that depreciation has turned out to be a planned and calculated deduction. It implies that how much you will be able to claim for depreciation will be calculated with the help of formula. The calculation will be based on your building’s construction cost (Division 43), asset values, and effective life of every asset in your property (Division 40).
What is the role of an expert Quantity Surveyor?
It is not a herculean task to claim for depreciation. You can hire the services of professional QS to prepare your rental property depreciation schedule. An expert QS will be entrusted with the task of calculating depreciation that you may claim yearly and report it in your depreciation schedule. A depreciation schedule can be explained as a one-off purchase highlighting specifics of all deductions going ahead for the rest of your property’s lifespan. You may provide your depreciation schedule to a reliable accountant when you do your taxes every year.
You can start claiming depreciation as it is a relatively simple procedure. You may get in touch with specialist QS from Deppro depreciation to arrange a tax depreciation schedule for your property. It is worth noting Quantity Surveyors have been recognized by ATO under tax legislation TR97/25. A Quantity Surveyor possesses the important skills required for estimating construction costs for depreciation purposes. You should also organize a site inspection of the property to grab measurements and take pictures’ record of any assets inside the property.
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Are you paying lots of taxes? Worry no more. You must start checking your options – can youclaim depreciation on a rental property. Investing in property has already emerged as a top choice for many individuals. Additionally, there are several expenditures that you may claim in the form of tax deductions from a rental property. There are scenarios when allowable deductions may surpass rental income and put you in a loss position. It is also known as negative gearing.
Given below are some costs that will help you enhance your deduction on your rental property:
1. Borrowing costs:
This expenditure is linked to the fee produced when borrowing money for the purchase of a property. It is worth noting that these expenditures are eligible for deductions over a period of loan or more than 5 years period. For this, the total borrowing expenditure must be over $100. You will be able to claim several borrowing expenditures which may include Loan establishment fees, mortgage broker fees, stamp duty levied on the mortgage, lender’s mortgage insurance among others.
2. Gardening fees:
These costs are also eligible for deduction. This will include dump fees, tree cutting charges, replacement costs incurred in garden tools, sprays, fertilisers, mower expenses, etc. You may speak to leading professionals as well if you face difficulties in calculating your tax depreciation cost.
3. Land Tax:
Land tax is the tax levied on the value of the land which is also tax-deductible. The bill of assessment of the land tax payable will be provided soon after the land tax registration form is submitted.
4. Repair and maintenance cost:
The cost that you incur when doing repairs and maintenance is also deductible. However, the cost can be claimed at a specific rate every year. Repairs are referred to as the cost that you bear when there is damage or deterioration to the property. For instance, when you replace a part of a window damaged during a tornado or hurricane, it may also include repairing electrical appliances, plumbing, painting the rental property, and repairing due to falling of tree branches, etc.
5. Telephone expenditures:
You can also obtain deductions on expenses incurred due to telephone calls. The telephone calls that you make while maintaining the investment property are always tax-deductible. You should calculate precisely all the allowable depreciation on rental property to maximise your deduction.
6. Water expenditures:
It is interesting to note that water rates are also tax-deductible. However, it will happen only in those scenarios when you pay the water bills and not your tenant.
7. Stationary and postage expenses:
This may include the expenses linked to the purchase of pens, paper, or various other office stationery items. It will also comprise the postage used for a rental property to communicate with agents or tenants. These expenses will be deductible.
Building tax depreciation may also include various expenses for which you may claim a deduction. You may also seek deductions on agent fees and landlord insurance to cover the property from being damaged.
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Are you facing difficulties deciding whether to invest in a commercial or residential property for your portfolio? It may become difficult to comprehend tax depreciation allowances available for investors of commercial property over those available for residential properties. There are scores of rules that are applicable and differences in depreciation discovered may vary considerably. However, when you gain awareness on commercial property depreciation, it will assist you in making informed decisions. You must acquire detailed knowledge of depreciation rules for rental property and commercial properties.
Given below are some ways that will help you in enhancing your tax benefits:
1. Are older buildings eligible for building allowance?
The building allowance can be described as a decline in the value of commercial property’s concrete, mortar, brickwork, concrete, etc. The date when construction began will help in deciding what building allowance you may claim. For non-residential properties, allowance is kept at varying interest rates. It is 2.5% (20 July 1982 – 21 August 1984), 4% (22 August 1984 – 15 September 1987), and 2.5 % (16 September 1987 – Onwards). You should have detailed knowledge of investment property depreciation rulesbut if you don’t, contact Deppro today to learn more.
2. Claimable objects differ by industry and actual life:
Every year, the ATO prepares a list of assets that you can and cannot claim. Commercial property owners do not have their own list. However, some assets are eligible to be claimed at varying rates to residential properties. For example, carpets are eligible to be claimed for a period of eight-year in commercial and ten years for residential. You will also find industry-specific assets that the ATO has specified for depreciation claims. And, if you have a restaurant, you can claim items in particular to your line of business. It is important to get the property valuation done by an expert.
3. Tax break assists small-time business owners:
It is worth noting that small business owners can significantly enhance their cash flow with the help of a tax break. According to the May 9, 2017, federal budget, the immediate asset write-off got stretched till June 30, 2018. The federal budget projected to stretch the legislation in 2018 once again and, after a long postponement, the extension of legislation was passed by Senate on September 12, 2018.
The bigger the building, the more you may claim. The height of the building may play an important role in the amount of depreciation available for property owners. You may refer to ATO property depreciation rules. Bigger structures may attract increased deductions because there is more capital works expenditure involved in the building construction. And, multi-story buildings largely have common property assets like lifts and fire services that may lead to plant and equipment depreciation.
https://deppro.com.au/wp-content/uploads/2020/06/AdobeStock_321653640.jpeg8001200adminhttps://deppro.com.au/wp-content/uploads/2017/04/logo-deppro-final-300x140.pngadmin2020-06-30 06:42:062020-06-30 06:42:06Uncovering the Tax Benefits of Commercial Property Depreciation
It is vital to claim depreciation as it is one of the most important tax benefits that you can avail. However, several property owners are not aware of this benefit. You should never overlook depreciation for tax purposes.
Depreciation can be defined as a non-cash deduction. You do not have to invest even a single penny to claim it. As any property ages, it begins to witness some wear and tear. The Australian Taxation Office (ATO) does not bar investors from claiming rental and investment property depreciation. It is interesting to note that the ATO has recognised over 1500 items as depreciable assets. You may seek the services of an expert Quantity Surveyor to claim these deductions.
Given below are some key points that you must be aware of while claiming tax depreciation:
Plants and equipment:
The ATO has identified and specified that plant and equipment undergo wear and tear at a relatively fast rate. As a result of this, these items may need to be replaced a little earlier than others. Plant and equipment may include the loose assets or control panels for automated systems in the building. These items include carpets, ovens, blinds, cooktops, AC systems, door closer, garage door motors, and freestanding furniture among others. If you are still facing some confusion, get the Deppro contact number and eliminate all your doubts.
Capital works allowance:
These are based on the past construction cost of the investment property. You will be eligible to claim capital allowances on your actual residential property where it was built after September 15, 1987. It is important to note, you can claim any qualifying renovation or developments completed either by you or the earlier owner. For instance, if you constructed your property in the year 1996, you can assess the cost to construct the property at that time and you will be able to claim 2.5 percent of the value each financial year. The depreciable items are driveway fences, sinks, basins, baths, garages, door & window fittings, etc. You may also like to read helpful Deppro reviews to clear your doubts.
Can you claim depreciation if it was built before 1987?
To be eligible for depreciation deductions, the building does not have to be new. New and old residential and investment properties will attract depreciation deductions alike.
You must be aware of depreciation schedules and how they may be able to help you to save money. Any building qualified to claim building write-off allowance has a maximum life of 40 years from the date when construction was finalised. In other words, the owner will be eligible to claim a maximum of 40 years of depreciation on a new building.
You must prepare your house depreciation report effectively to minimise your tax liabilities. According to research, 15 percent to 35 percent of the construction cost of a residential property is manufactured from plant & equipment items. You should maximise their value in order to maximise your depreciation claim. Your depreciation schedule will outline the specific deductions available on a particular property; the details will come handy for the property investor while preparing a tax return report.
https://deppro.com.au/wp-content/uploads/2020/06/AdobeStock_120077071.jpeg12131500adminhttps://deppro.com.au/wp-content/uploads/2017/04/logo-deppro-final-300x140.pngadmin2020-06-30 06:30:442020-06-30 06:30:44Getting Smart about Tax Depreciation
You may find it difficult to comprehend the various tax depreciation allowances available for owners and tenants of commercial property. With increased awareness about Australian tax depreciation, property owners and tenants may make more informed financial decisions and enhance their cash flow. A property owner is eligible to claim depreciation for Division 43 capital works that they have paid for. This may include building, structural additions, and recently constructed or renovated kitchens, outdoor areas, and improved bathrooms. Additionally, Division 40 assets are also claimable that they have paid for and included as part of the tenancy agreement. Tenants may also claim depreciation for building fit-out in case they paid for it as along with machinery, furniture, etc.
Here is the checklist:
1. Capital works deductions:
These deductions are applicable to structural elements of a building. Capital works deductions will apply on bricks, mortar, walls, tiling, flooring, wiring, concrete, mezzanines, etc. These deductions are based on the past expenditures of the building. And, apart from the tourists’ accommodation, they can be claimed on commercial buildings in which construction started after July 2, 1982. Capital works deductions for tourists’ accommodation are eligible to be claimed on building in which construction began after August 21, 1979. Consider these factors when you calculate depreciation for property.
2. Plant and equipment depreciation:
Plant and equipment assets can be defined as those assets that are removable within an income-generating property. It may include hot water systems, ceiling fans, carpets, air conditioners, exhaust fans, light shades, and blinds, among others. Depreciation for plant and equipment assets will be calculated on the basis of the individual effective life of every object as specified by ATO. The actual life of assets tends to differ from one industry to another industry. Therefore, it becomes significant to refer to an expert Quantity Surveyor, as they will ensure that deductions are calculated appropriately.
3. Tax depreciation schedule:
A tax depreciation schedule can be described as a report that includes all deductions in the income-generating property. The report is prepared with the assistance of an expert Quantity Surveyor. It can assist to enhance property owners’ and commercial tenants’ flow of cash. The quantity surveyor will require a few details while preparing a schedule. Amid the vast commercial property types, an expert site inspector will have to carry out detailed scrutiny. In this they will assess the building and floor coverings, specify construction methods, the material used, condition of te property, and workmanship, among other things. The Quantity Surveyor will then use these details to enhance depreciation deductions.
Tax Depreciation Schedule will remain in existence for forty years. The quantity surveyor will also extend his help to property investors in claiming depreciation on investment property. If you are keen to boost the capital works and depreciation deductions, you must always hire a professional quantity surveyor as they will help in processing known and unknown costs alike. Not to mention, they can also asses the contract of sale and tenancy contracts to make sure that building works and assets are correctly allocated between entities.
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