Benefits and Shortcomings of Renting a Furnished Property

When a property owner plans to rent their house, there are many things that come along with it. Renting in a furnished or unfurnished format is just another thing to consider. However, there are various advantages that an investor can enjoy by renting their property as a fully furnished residence, especially depreciation for tax purposes. However, one needs to take into account all the factors to determine whether letting the property in a furnished state outweighs letting it out in an unfurnished condition.

Disadvantages of renting a furnished property

Though there are many advantages of renting a furnished property owing to the tax benefits, there are a few disadvantages too. The first shortcoming is that you are required to spend oodles of money when you plan to furnish your home. In no way, is it a cheap investment; expect it to cause a money drain. On the other hand, you may not be sure about how your tenants will look after your possessions. Finding people who can do justice to your property is a challenging task. Thus you may always find yourself in skeptical mode worrying if your belongings are in safe hands.

Advantages of renting a furnished property

On the contrary, there are a few reasonable advantages to renting a furnished property. A furnished property makes your house look appealing. Thus you can increase the weekly rent amount. A furnished house attracts the customers; there are less chances that your home will face rejection and lie vacant for a long time. Apart from all these benefits, one of the major benefits that one can redeem is tax benefits. Yes, furnishing is proportional to high weekly rentals and property tax depreciation at the same time.

Depreciation benefits for a well-furnished property

Renting a fully-fledged property allows some benefits re: depreciation deductions. The house depreciation report depends a lot on the circumstances and the property type that the investors are planning to rent. The owners can claim a deduction even on the plants and equipment that exist in the property based on the life of the items. Yes, all your smoke alarms, oven, fixtures, etc. can also be listed down for a tax rebate. The depreciation rates of these commodities are generally higher than that of capital works or construction.

Though you may feel that furnishing your property may cost you a few more bucks, it can serve fruitful to you in the long run. The initial investment can bring in long term benefits of claiming tax rebates every year.

Bottom Line:

Seeking advice from experts and getting them to prepare property depreciation reports can further help you to reap more benefits by using their years of expertise and knowledge.

Claiming the Maximum Deductions Out of Your Rental Property

Are you paying lots of taxes? Worry no more. You must start checking your options – can you claim 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.

Conclusion:

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.

Uncovering the Tax Benefits of Commercial Property Depreciation

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 rules but 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.

Conclusion:

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.

Getting Smart about Tax 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.

Depreciation schedule:

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.

Conclusion:

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.

Why you Need a Depreciation Schedule when the Construction Cost is Known

As the financial year comes to an end, it becomes imperative to get your depreciation ATO tax depreciation schedule sorted. You gain several benefits of securing a depreciation schedule prior to June 30. It will help in enhancing your return and make the most of your investment. It is worth noting that a quantity surveyor report also consists of a schedule of depreciable assets also known as capital allowances. Meanwhile, a different deduction for the fall in the value of depreciating assets in a rental property can be claimed.

Given below are some of the points that you must be aware of the depreciation schedule:

1. Depreciation deduction:

The Australian Taxation Office permits the property owners to seek a claim for depreciation or fall in value as a deduction. Depreciation has been categorised as a non-cash deduction thus meaning an investor won’t need to spend money to be able to make a claim. It is for this reason that depreciation deductions are ignored. And, it becomes an expensive mistake for investors as depreciation deductions present huge taxation advantages. When tax time arrives, property owners should ensure they have claimed all the deductions for which they are eligible. Income-generating property owners must seek claims for property depreciation tax deduction linked to the structure of building along with plant and equipment assets.

2. Claim cost of schedule:

A depreciation schedule has got a one-off expense that continues until the life of the property or for forty years. It will ensure that the owners have claimed their respective depreciation entitlements precisely.  It is worth noting that the cost of the depreciation schedule is 100% tax-deductible. One of the major benefits of securing a depreciation schedule prior to June 30 is that investors can claim the fee straight back that financial year. Investors must estimate tax returns in a precise manner.

3. Partial year claims:

In the case that you purchased an investment property and are waiting for the next financial year for claiming a deduction, you may miss considerable savings. Investors will be able to claim partial year deductions for the tenure in which they acquired their properties before June 30. The depreciation values of assets are precisely adjusted in accordance with the period during which it was owned. For instance, if the property was owned or rented for six months, the owner can get 50% yearly deductions.

Conclusion:

Investors must arrange a depreciation schedule at their earliest convenience. Deppro quantity surveyors have expertise in preparing depreciation schedules that save our clients lots of money.

A Quick Guide to Clear All Your Queries about Capital Gains and Property Depreciation

There are many questions that come to mind associated with tax depreciation report. You may often hear people asking how to claim their reductions? How to make the most of it? There are many such interrelated queries that investors have in their minds. So here in this article, we will take you down through a few questions that will clear all your doubts.

What is exactly property depreciation? Is it beneficial?

Property depreciation can be thought of as the depreciation of value on a building or property owing to the wear and tear that naturally occurs over the years. But property depreciation is not bad at all times; in some cases, it can reap benefits for you. When you have to pay taxes, property depreciation can be a boon that allows you to claim for property investment returns which means fewer taxes to be paid at the end of the year.

Capital works and its association with CGT

Capital works can be claimed on the building structure, which includes walls, roofs, bricks, electrical cables, tiles, etc. Claiming for capital work deductions can help in lowering the value of the base of your possession, which is further added to the capital gain. Thus you can expect a rise in the CGT amount, which becomes applicable during the sale process.

CGT and equipment depreciation

Many might not be aware of this, but you can even claim depreciation deductions on removable plants and mechanical equipment. Yes, you have heard it right, when you plan to sell your property, the profit or loss percent is computed separately on such items. You can seek assistance from tax depreciation quantity surveyors at Deppro to become more acquainted with the details. If the depreciation asset’s termination worth is higher than the cost then, you get to have a capital gain. On the other hand, the reverse case applies to incur a capital loss wherein the cost is higher than the termination price.

Can investors file for a discount?

A business owner who has invested in a property for more than a year stands eligible for a 50% CGT exemption. But, it is mandatory that they hold the property for more than a calendar year from the date of signing the contract.

Does property depreciation claim add to capital gains?

Yes, one can claim for equipment deduction and capital works at marginal taxable rates. Being in possession of a property for a period greater than 12 months makes you eligible for claiming a 50% deduction while selling your property. This implies that only half your property value is carried further for CGT, enabling you to file for capital work deduction claim. This will bring in some additional cash flow to your account, allowing you to be confronted with better opportunities for investments and to reduce the burden of your loans.

Types of CGT exemptions for people who reside in the property

If you are someone who dwells in the property, then you are excused from CGT as long as you use that property for your residence. Also, the land should not be more than two hectares. On the other hand, if the owners rent out the property to someone else and consider moving out, then the CGT exemption can be filed for about six years. But there stands a condition that such people should not purchase or own any other residential place.

Conclusion:

So these were a few things that you need to know as an investor to claim for property tax deductions. If you have more such questions haunting your mind, do let us know! We are here to help!

A Depreciation Checklist for Commercial Property Owners and Tenants

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.

Conclusion:

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.

4 Commercial Property Depreciation Facts You Must Know

Many commercial property owners aren’t aware that they are eligible to claim depreciation on property. According to a study, approximately 80% of investors miss the benefits of their commercial property and end up losing plenty of money every year in Australia. It is imperative for all commercial property owners to claim depreciation. These deductions can significantly enhance the positive cash flow of an investor and diminish the negative cash flow. We have prepared a list of significant factors that property owners may consider in a bid to earn more from their commercial property.

Given below are the factors about commercial property depreciation:

1. Depreciation and how you can claim it:

According to the ATO, it is necessary for investors to prepare a report of their income-earning from their commercial property. This will prove useful when preparing their income tax assessment. And, property investors of commercial property are eligible to claim depreciation. Depreciation takes place when a property shows signs of wear and tear in its structure, fixtures & fittings over the years. It is considered to be a non-cash deduction which means that investors must not spend any amount to claim it. Property investors must calculate depreciation on rental property in an accurate manner to maximise their claim.

2. Life of a building:

Property owners will also be eligible to claim any latest renovations that took place since July 20 1982 snd, it doesn’t matter if it was carried out by an earlier owner. Additionally, plant and equipment depreciation can be claimed as well, irrespective of age. The instances of plant and equipment may include carpets, and ac units, among others. Expert quantity surveyors will carry out a property inspection and take images and prepare a list of additions made to the commercial property. They will offer an itemised tax depreciation schedule to property investors that include the availability of deductions for a period of 40 years. You may seek a Deppro review from our professionals, in case you encounter any confusion.

3. Depreciation of other items:

While preparing a commercial building property depreciation schedule, it may be tough to work out who is eligible to claim depreciation for specific items. Landlord and the sitting tenant will be able to claim depreciation for any fit-out made to a property. Tenants of commercial properties will be eligible to seek a claim of depreciation for any fit-out that they introduced. It may include blinds, shelving, and carpets, among others. Additionally, owners of a commercial property can also claim depreciation on any installed asset or assets left by a previous tenant.

4. Select a method:

After calculating depreciation, property investors may choose two methods for making a depreciation claim. This includes: diminishing value method and prime cost method – property investors can use either. Deductions will be calculated according to a percentage of balance you leave to subtract under the diminishing value method. Meanwhile, the deduction for every year can be calculated as a percentage of cost under the prime cost method.

Conclusion:

You must be aware of how to calculate depreciation for your commercial property accurately to maximise your gains. If you face any difficulty in calculating depreciation, use our Deppro contact number, and call our experts. They will help you calculate it accurately. You may consult their quantity surveyor as well who have achieved specialisation in tax depreciation.

4 Tips to Claim Depreciation for Childcare Centres

Investors tend to show a keen interest in a property as there are enormous benefits when they file their tax return in Australia. Investors are keen to get a share in the profit of the growing real estate market.

Here are some of the reasons why childcare centres are becoming so attractive for investors:

1. Increase in depreciation schedule:

There has been a rise of 67% in tax depreciation schedules for childcare centres. The depreciation schedule has been rising consistently every year as there is a surging demand for these properties as an investment. The industry has witnessed robust growth in recent years. The fast growth of the industry has presented numerous opportunities for investors.

2. High demand for childcare centres:

There has been a high demand for childcare centres in the last few years. The main factors responsible for the sharp demand include strong rental yields and profitable depreciation deductions. However, some feel that there is an oversupply in the industry. Childcare centres have emerged to be a profitable investment. The hotspots may include suburban areas that have become famous among families. Additionally, these centres are becoming a famous option for proactive investors searching for the next asset to add to their portfolio. Among social factors, high birth rates and surging need for flexibility have contributed to the rising demand.

3. Long term agreement:

Childcare centres are largely leased out by tenants on a long term basis agreement that may last between five to ten years.  In this period, the centres offer positive rental incomes and remain a profitable asset to an investor’s portfolio. Investors can enhance their cash flow by taking benefit of the several depreciation deductions available from the many childcare centres. Childcare centres offer attractive yield on investment property that investors must not miss.

4. Huge deductions:

Reports suggest that when several depreciation schedules were prepared for childcare centres, it uncovered huge deductions over the life of the property. Owners can claim several depreciable items such as artificial grass, kitchen equipment, etc. And, tenants can seek advantage of the available depreciation deduction of their furniture, toys, and play equipment, among others. It is worth noting that owners of childcare centre have many plant and equipment assets. And, all of them offer some depreciable value.

Conclusion:

Childcare centres offer immense benefits to investors and help in lessening their tax burden. If you face any confusion while preparing the property report, you may seek the help of experts. According to a case study, owners get the opportunity of claiming $25,475 worth of depreciation deductions for plant and equipment. And, in the cumulative five years of securing the investment, the depreciation claim will total approximately $71,670.

5 Tax Saving Tips on Your Investment Property

When you purchase and own an investment property, it gives you the benefit of saving plenty of tax. You get the advantage of claiming the various expenses and some depreciation against your rental incomes. When you prepare your property depreciation reports, it helps in minimising your tax burden. You must ensure that you manage your investment in the right manner so that it yields you profit. Your investment should also help you achieve your financial goals. An intelligent property investor may adopt several strategies to reduce his tax and increase his tax benefit.

Given below are some key tips that will help you save tax on your investment property:

1. Manage your capital gains:

Capital gains created in a particular year can be reduced by offsetting it against capital losses that you face. If you are keen to decrease the capital gain on the sale of a property, you may think of selling any asset that lost its value. You get a 50% discount on capital gains when an asset is held for over 12 months. Since the saving amount is huge, you should consider the timing of any sale. It is worth noting that the important date for calculating your capital gains is the contract date instead of the settlement date.

2. Manage your capital losses:

The capital losses that you may face in any year can be extended to future years. You may adopt this procedure when there are inadequate gains to absorb in the similar year. The capital losses can be extended to future years for an unknown tenure. You will not be able to carry the losses back. Therefore, if you achieved capital gain, you can initiate a loss to offset it against. You may seek the help of experts to find out your exact property tax depreciation.

3. Claim building depreciation:

It is the depreciation that you may claim on the building itself. How you will be able to claim it will depend on construction costs.  For a large number of properties, you may claim 2.5 percent of construction for at least 40 years. You must be able to determine the construction cost. The ideal way to decide it is by hiring a quantity surveyor to make a property tax depreciation schedule for you.

4. Expenses incurred for visits to the property:

It is important to note that if you face expenses related to property visits, you will be eligible to claim them. They will help in boosting your returns.

5. Plant & equipment depreciation:

This is the depreciation of assets within the property. It will include things such as curtains, fixtures, carpet, etc. You need to upgrade or replace these things at some point of time as they tend to depreciate faster.

Conclusion:

You may claim the above expenses and reduce your tax burden every year. You must assess the tax depreciation life effectively during this process. If you are conducting any renovation or replacing something major, don’t forget to do a scrapping schedule. The quantity surveyor will be able to calculate how much value is left for a particular item. After that, you will be able to claim that in the form of depreciation.