Over recent years, the ATO has paid growing attention to tax returns submitted by tax payers relating to investment properties.
It is therefore highly likely that the Australian Taxation Office will pay particular attention to tax depreciation reports for investment properties when property investors submit their tax return from 1 July.
In particular, they may pay particular attention to tax depreciation reports that are prepared without a physical inspection of the property.
Unfortunately, a growing number of tax deprecation companies are not undertaking physical inspection of properties to cut costs and this failure could result in serious problems for their clients if they are audited.
If you are a property investor and plan to visit your tax accountant regarding your tax return from 1 July, you should raise the issue of tax depreciation and obtaining an ATO compliant tax depreciation schedule for your property or properties.
It is important to raise with your accountant the fact that desktop estimates of potential tax depreciation benefits are not accepted by the ATO and that a physical inspection of the property is required.
Accountants need to protect the interests of their clients by ensuring that the tax deprecation company they recommend to their client, conducts a physical inspection of the property.
The same principle applies to other professionals related to the property sector such as mortgage brokers who refer their clients to a tax deprecation company. Similarly, they should check if the tax deprecation company undertakes a physical inspection of the investment property before making a referral.
This is a simple check but one which could ensure that their client does not have to pay substantial penalty fees imposed by the ATO because the tax deprecation report is not compliant.
Overall, it is still unfortunate fact that a large number of tax payers who own investment properties will collectively miss out on millions of dollars in tax depreciation benefits over the coming weeks simply because they do not correctly claim them through lack of knowledge.
DEPPRO estimates that only one in five residential investors make use of the tax depreciation entitlements which are available to all investors on all investment properties.
Many property investors who have owned their properties for several years and have not undertaken a tax depreciation schedule still have the potential to claim back thousands of dollars in tax depreciation benefits.
A depreciation schedule can be undertaken at any time by a property investor. If you own a property for a number of years, you can still undertake a depreciation schedule and put in an adjusted tax return to enable them to obtain unclaimed tax depreciation benefits.
Most investors do not realize that tax benefits obtained through depreciation can be equivalent to 60% of the total purchase price of the property.
For a new apartment in a capital city, for example, this can equate to over $300,000 in possible tax benefits through depreciation.
You should engage the services of a tax deprecation company who will undertake an inspection of your property and provide you with an ATO compliant tax depreciation report which you can provide to your accountant.
This report is a ‘once off’ and will outline the amount of tax benefits you can claim on an annual basis. Anyone considering employing a tax depreciation company should ensure that they are a member of the Australian Institute of Quantity Surveyors (AIQS).
Obtaining a tax depreciation schedule that is compliant with ATO guidelines is a small investment that can deliver a huge financial return and boost cash flows during a time when rents throughout Australia are under downward pressure.
https://deppro.com.au/wp-content/uploads/2018/06/property-sector-warned-ATO-cackdown.jpg200300adminhttps://deppro.com.au/wp-content/uploads/2017/04/logo-deppro-final-300x140.pngadmin2018-06-21 03:38:352018-06-21 03:39:44Property Sector Warned About ATO Crackdown On Tax Depreciation Claims
2017 was a year of rising property prices, people educating themselves about property investment, and a massive change in tax depreciation laws. We’ve collected some of the best articles that hit our news section in 2017 and bring them to you here.
It’s the debate that just won’t die! A scathing critique by property expert Tim Gurner about Millenial’s ability to save for their first home became a repeat headline over the year. Now smashed avocado is a tangible comparison to property prices. We even found a ‘luxuries’ calculator showing people how much a house deposit is equal to in yoga classes, trips abroad, and takeaway coffees.
When a mate tells you they invest in property, the likelihood is they’ll only have one or two items in their portfolio. Less than one percent of investors have diverse holdings of six or more assets. If you want to emulate the one percent, educate yourself here.
It’s common practice to buy a home, renovate it, sell for a profit and then repeat the cycle all over again. From curb appeal to the garage, we found 8 inspiring builds and overhauls to help your project along.
From an apartment block built for retirees in South Australia to a two bed, two bath home with a pool in the Northern Territory. We found properties from each state that you could snap up for half a million dollars or less (at the time the article was published).
Tax depreciation specialists, accountants, and property managers are part of your team when you get into the game. Use this article to give yourself a basic understanding about what a great manager should do before you go hiring that guy off Gumtree.
https://deppro.com.au/wp-content/uploads/2017/09/deppro-resize-3.jpg126190adminhttps://deppro.com.au/wp-content/uploads/2017/04/logo-deppro-final-300x140.pngadmin2018-01-15 03:06:242018-01-15 03:06:24Tax depreciation, property investment and our other greatest hits; 2017 in review
Confused about depreciation rules for your rental property? Did you even know there were rules in the first place? Depreciation, tax and claims processes are large and confusing mazes, so we gathered articles from around the web that make things crystal clear.
Investors who hold both commercial and residential properties were thrown for a loop in May 2017. Starting from July, the beginning of the new financial year, the Federal Budget came into effect with new depreciation rules. These rules affect what owners can claim which in turn claims how much they get back over time.
Investopedia is a useful website both novices and experts can refer to. The page linked above goes into the basics of depreciation such as how it’s calculated and when it ‘begins’. Hint: it’s not actually after the settlement date.
Make sure you’re square before the tenants move in
Rental property owners must navigate complicated tax rules. Not navigating them correctly leads to costly penalties. To help the common Australian investor, the ATO made a top 10 list of tax mistakes to avoid. These include what type of expenses to claim, as well as the right portion of costs and how to keep the right records.
If you need a printout to have on your nightstand, there’s a PDF available to download.
This page is a one-stop-shop for investors wanting to know more about the process. There’s an uncomplicated list of depreciation rules, definitions and examples of what assets you can claim.
The page also describes the methods used to calculate depreciation costs, prime cost vs. diminishing value. But the quantity surveyor handles these calculations, not the investor. Once the values are worked out they go into the depreciation report. This crucial investment tool is recommended at the end of the page as the final step of claiming depreciation on an investment property.
https://deppro.com.au/wp-content/uploads/2017/08/deppro-resize-surveyor.jpg126190adminhttps://deppro.com.au/wp-content/uploads/2017/04/logo-deppro-final-300x140.pngadmin2017-12-15 00:15:372017-12-15 00:18:21Depreciation rules for your rental property | Articles from around the web
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.
https://deppro.com.au/wp-content/uploads/2017/07/deppro-resize-3.jpg126190adminhttps://deppro.com.au/wp-content/uploads/2017/04/logo-deppro-final-300x140.pngadmin2017-10-13 00:21:372017-10-13 00:21:37The one depreciation law change you absolutely need to know
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 sixor 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:
List of tax offsets
Not all tools are free, but they pay for themselves in the end thanks to that amazing tax refund!
https://deppro.com.au/wp-content/uploads/2017/07/deppro-resize-4.jpg126190adminhttps://deppro.com.au/wp-content/uploads/2017/04/logo-deppro-final-300x140.pngadmin2017-09-26 00:37:382017-09-26 00:37:38This is how to get your best tax return yet
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.
https://deppro.com.au/wp-content/uploads/2017/08/deppro-guide.jpg126190adminhttps://deppro.com.au/wp-content/uploads/2017/04/logo-deppro-final-300x140.pngadmin2017-08-18 01:44:432017-08-09 01:50:44A beginner's guide to a 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.
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.
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.
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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.
https://deppro.com.au/wp-content/uploads/2017/07/deppro-resize-6.jpg107190adminhttps://deppro.com.au/wp-content/uploads/2017/04/logo-deppro-final-300x140.pngadmin2017-07-21 00:35:322017-07-06 00:41:40Avoid emotional fallout when investing in property with these tips
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).
https://deppro.com.au/wp-content/uploads/2017/07/deppro-resize-5.jpg126190adminhttps://deppro.com.au/wp-content/uploads/2017/04/logo-deppro-final-300x140.pngadmin2017-07-19 00:01:372017-07-06 00:32:53Depreciation on investment property makes life easier
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.
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.
https://deppro.com.au/wp-content/uploads/2017/07/deppro-resize-4.jpg126190adminhttps://deppro.com.au/wp-content/uploads/2017/04/logo-deppro-final-300x140.pngadmin2017-07-14 00:01:462017-07-06 00:24:00What everybody ought to know about tax depreciation