Can I Back-claim for Depreciation on My Rental Property?

Did you own a property for several years but failed to claim depreciation? It 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 lodgments 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.

Given below are vital details that you must consider when you back-claim depreciation on your rental property:

How Many Years of Depreciation You Will Be Able to Back-claim?

As per ATO rule, 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 organizations. 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.

Amendment Request

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 charging 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 to. 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.

Conclusion:

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.

All You Need to Know as an Investor While Claiming for a Property Deduction

With the commencement of the new financial year, investors may be having a tough time cracking the code of improving their deductions. Can you claim depreciation on a rental propertyCan you claim depreciation on an old property? There may be many such questions that may be haunting your minds to save some of your hard-earned money. So if you are someone who is looking out for what and why to claim for a deduction, here is what you need to know:

The buzz about depreciation

A depreciation schedule is basically a kind of deduction that an investor can claim on his/her property. As the property ages, the wear and tear on your building’s fixture and structure stand eligible for deduction claims.

Claims on an old property

If you are someone having a thought in mind that only new properties can be claimed for depreciation, then you need to clear this concept in mind right now. There is no hard and fast rule that your property needs to be new for depreciation claims. According to ATO, the properties that date back before July 1985 cannot be claimed for depreciation. But equipment and plants on the same property comes in the category of allowable depreciation on rental property and are not bound by any such restrictions for a depreciation claim.

Also, you need to know that even if you have not claimed for deductions on your property for the past two years, you can adjust it while filing for the current year tax returns.

Depreciation for long forty years

In concern with the orders issued by ATO, you can claim for write off on a property for a long term of forty years. So if you have brought a new property, then a piece of good news is that you can claim building tax depreciation for forty years. On the contrary, for old properties, the balance number of years from the forty-year term can be claimed for deductions.

Renovation depreciation

Opting for renovation can be quite a costly task, but the only relief is that you can claim tax deductions in association with the renovations made on your property. For this, you can contact a quantity surveyor who will conduct a site inspection and further let you know the tax depreciation cost while filing for deductions.

Hire a qualified surveyor

Always consider hiring a professional and experienced quantity surveyor, as they are the ones who can chalk out the right depreciation schedules for your benefit. Quantity surveyors possess high-level knowledge in their field and have all the latest information. Owing to their association with different regulating bodies, they can help you in significant ways to frame out proper depreciation schedules.

Conclusion:

Many investors are not aware of the building tax depreciation they are eligible for. And, even if they know they may not know the exact amount that they can claim for on their property. Thus the onus lies on hiring a quantity surveyor who will definitely charge you for their services but, in return, can save you from simply oozing out oodles of money from your pockets.

6 Tips for Investors to Make the Maximum Tax Benefits of Commercial Property Depreciation

It can be a little hard for any of us to understand the tax depreciation allowances that are available for all the investors of commercial property. We often get confused between the depreciation rules for rental property and then commercial property assets as the difference in depreciation found can vary significantly. So, by becoming more aware and informed about the commercial property depreciation, an investor can choose the best option available to him. So, let us read about all the important tips that are important to get tax benefits that can be claimed on commercial property depreciation:

1. Claim Tax Depreciation and Continue Occupying the Property

There are many investors who buy a commercial property after their name as a company trust and then lease the property back to the business they own. This helps the individual taxpayer to claim the tax depreciation allowance, which is significant with commercial property. This is legal and can be done. You have to go through the investment property depreciation rules for further information.

2. Old Commercial Buildings Certify for the Building Allowance

The building allowances refer to the rapid fall in the value of the commercial property’s work. Work here refers to all the brickwork, concrete, etc. The date of the construction determines what building allowances you can claim.

3. Claimable Items Differs by Industry and Effective Life

You have to be well informed from all sides to get the best benefit out of your property. Every year there is a list of assets that you can or can’t claim by ATO property depreciation. Commercial property owners do not have any list but there are some assets that are claimed at different rates to residential properties. For example, rugs are claimed over eight years in commercial and ten years in residential. There are also certain industry-specific assets that ATO detailed for depreciation claims.

4. Small Tax Breaks to Help Small Business Owners to Increase Cash Flow

In the 2018 federal budget proposed to extend the legislation and after a long time between May and September, the extension of legislation was finally passed by the Senate on the 12th of September 2018.

5. The Bigger the Building the More You Can Claim

The height of the building plays a key role in tax depreciation. The taller the building, the more amount can be claimed for depreciation for the owner of the property. Taller structures attract higher deductions because there are great expenses and greater capital works involved in the overall construction of the building. Multi-storey buildings have other common assets like lifts and fire services which can result in plant and equipment depreciation being available for the owner to claim. Other commercial properties like swimming pools, gyms, etc. can be put for the claim of plant and equipment deductions as this also plays in overall depreciation value for the property investor.

6. Look for an Experienced Quantity Surveyor

The ATO recognizes all quantity surveyors as one of the few professions that have the required construction costing skills to calculate the cost of all the items for the very purpose of depreciation. If the original price of the construction is unknown it is always better to consult with a good quality surveyor for any tax depreciation help to estimate the costs for you.

Bottom Line

As there is much difference between a commercial property valuation and a residential one, it is always better to know the proper depreciation value that you can claim later without any problem. As mentioned above, engage with a proper quantity surveyor to give a ready detailed report outlining the claim each year on both the decline in value of the building’s structure as well as income-producing assets.

5 Ways for Maximizing Depreciation Deductions for a Commercial Space

If you’re planning to purchase a commercial space, then claiming depreciation deductions should be the foremost priority. As you claim depreciation deductions, you would be able to save a lot of money every year. Depreciation deduction is nothing but the difference between the negatively geared investment and the positive cash flow. But, even as you claim a depreciation tax deduction on rental property, you would be able to improve the financial position of the business. So, here are some ways through which you can maximize the depreciation deductions for your commercial space.

1. Think about ownership to your benefit

When you purchase a commercial property, you can claim for a single entity and thereby increase the deduction. This is only applicable if you’re managing the business from a certain location. When it’s time to claim the depreciation, you may take into account the actual building as well as some items like fittings and fixtures. But, in this case, the fixtures have to be set up at the location from where you are managing the business.

2. Get in touch with an expert

All property investors usually contact quantity surveyors. These are experts who specialize in deducting the tax depreciation. Once the expert inspects and evaluates the property, he would then proceed with a tax depreciation schedule. Such a schedule would help to foresee deductions that you can claim up to 40 years. Moreover, once you approach one of the reputed tax depreciation surveyors, you could think about ongoing profitability and financial planning.

3. Maintain a record of the costs

To keep a track of depreciation deductions properly, you should always remember to maintain a record of various costs. You could note down the running costs, the daily expenses, and the upfront costs. However, when you keep a record of the costs on a regular basis, you should consider the financial transactions for your business and the commercial investment property. Besides, you should always take into account the expenses and the costs associated with the assets.

4. Think about the best depreciation method

When you speak with a quantity surveyor, the expert may suggest a depreciation method for the investment property. For short-term investment, the surveyor opts for the ‘diminishing value’ method. But, for long term ownership, the expert may move ahead with the ‘prime cost’ method. Regardless of the method, both can help you save a lot of money. The surveyor could further choose the method depending on the situation. If you wish to know the depreciation limits, then you should refer to tax depreciation tables 2015.

5. Always seek the benefit from the ‘first year’

During the first year, you can expect maximum depreciation deduction. While you can observe more depreciation on assets or certain items, you can insist on the expert to use a reliable tool. This can actually save time when the surveyor tries to maximize the upfront savings you can gain through depreciation.

Conclusion:

If you hardly have the time to calculate the depreciation, then you can seek assistance from experts. But, if you consider purchasing a property while planning ahead, then it’s better to speak to an experienced quantity surveyor. Way ahead, you can request the expert to come up with a depreciation schedule. This would help you know more about the depreciation amount for various assets depending on the asset’s life. Just in case you tend to pay more taxes, then you can request tax refunds a bit later.

5 Smart Ways for Investors to Use the Extra Cash from Depreciation

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.

Bottom Line:

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 depreciation schedule for a detailed picture.

3 Facts about Quantity Surveyors You Must Cross-check When Selecting One for Obtaining a Depreciation Schedule

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.

Bottom Line

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.

What Tax Deductions Can I Claim When I Am Working From Home

Working from home has become the new normal. The major advantage that it offers is the greater level of flexibility. However, there is one thing that has no flexibility: no matter where we work from, our tax obligations still remain the same. Did you know that you may be eligible for a depreciation tax benefit for your incurred costs during the COVID situation as well? Yes, you read it right! You can claim certain costs related to work from home obligations. However, it must be noted that this only concerns the people who usually work from an office but due to the COVID pandemic, or any other reason outside their control, are currently working from home. You should also remember that you cannot claim the amount reimbursed in this case.

Methods for Calculating Your Tax Deduction While Working From Home

Taxpayers were generally using two different methods before 1 March 2020 for calculating home office tax deduction, the Fixed Rate Method and Actual Cost Method. And these are still applicable.

But as a result of the COVID-19 pandemic, the Australian Taxation Office (ATO) introduced of the Shortcut Method, which applies to the periods:

  • 1 March 2020 to 30 June 2020 for the income year 2019–20; and
  • 1 July 2020 to 30 September 2020 for the income year 2020–21

According to the ATO, extension in the period is possible. However, this depends on the length of time the pandemic disrupts normal operations.

The ATO depreciation rate under the Shortcut Method is 80 cents per hour. This is for all “running expenses”. While using this method, you must record the corresponding working hours at home.

Methods for Calculating Your Tax Deduction While Working From Home

You should fully do the office work from home and not just the minimal task. The below are items that can be claimed in part as work from home expenses as listed below:

  • Occupancy expenses like mortgage interest, rent, and other costs.
  • Heating, cooling, and lighting – this includes various household utility bills.
  • Home office equipment- this includes computers, telephones, and printers.
  • Work-related phone calls – this includes phone rentals or mobile usage for office work purposes.
  • Internet usage
  • Depreciation in the value of furniture and fittings – you can claim for furniture such as desks and cupboards which are used for home office.
  • Depreciation of office equipment and computers

It is always advisable to consult an expert for all the tax-related matters concerning the common tax issues and especially about the tax depreciation schedule for rental property.

Is There a Need to Follow Any Tax Depreciation Schedule While Working From Home?

With the short cut method, it is not required. In other cases, an accountant can help in calculating the depreciation value. But if you are running a business from home, an expert can guide you in preparing the federal tax depreciation schedule.

What Are the Capital Gains Tax Implications When You Work From Home?

If you are working from home, you do not have any capital gains tax (CGT) implications for your home. This applies when you run a business from home.

Conclusion

Today more people are working from home however, facing certain expenses that weren’t in the picture during the regular times. You can follow the above procedures for achieving the depreciation tax benefits. Understanding tax claims is a challenging process but, the shortcut method gives you a simple calculating option. All you need to do is maintain the record of your working hours and expenses. If in any doubt, contact a tax expert for advice.

Can I Back-claim for Depreciation on My Rental Property?

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.

Amendment Request

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.

Conclusion:

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.

Top 4 Tax Deductions Claimed by Property Investors

It is significant to ensure that you maximize your tax deductions for your investment property every year in Australia. The higher the tax deductions will imply less tax payment to the Australian Tax Office (ATO). When you buy an investment property, you must consider a few vital questions. But, a large number of investors often take into consideration the tenanting capacity, location, and purchase price of the property. They end up overlooking depreciation for residential rental property in many cases. Depreciation has the capacity of unlocking significant cash flow potential within an investment property. It will leave you with thousands of additional Dollars every financial year.

Here are some important tax deductions that you must not ignore:

1. Capital allowance and depreciation:

These tax deductions are meant for the overall wear & tear of your property over a period of time. These tax deductions have emerged to be the biggest deductions being claimed by property investors. However, these deductions often tend to be the most missed ones. You must get in touch with a renowned quantity surveyor to discover what deductions you may claim on your property. It is because results tend to vary. You need to assess factors when you bought it, how old it is, how long you have owned it, and renovations. An expert QS will assess all this data and prepare your investment property depreciation schedule ATO.

2. Interest and fees:

If you took a bank loan for buying a rental property, you can claim deductions for interest levied on that loan amount. In case you paid $15000 interest for the financial period including $150 bank fees, you can claim the entire $15,150 as a tax deduction. If property remained tenanted briefly, your accountant can prepare a pro-rata claim for the period during which it was leased.

3. Property advertising and management fees:

It will include the fees that you paid while trying to find a tenant for your property. It may include expenses like online, print, or signage and you will be eligible to claim them against income produced by that property. Similarly, you may also claim fees, commissions, or payments that you paid to an agent for managing your property. There are several reliable property depreciation consultants available and you may seek their assistance while preparing your depreciation report.

4. Insurance:

It has emerged as one of the most significant expenditures. It is worth noting that you can claim the cost of your insurance premiums against your rental property.  And, if you need to claim a part of this expenditure as a result of a partial rental year or several properties insured together. In such a scenario, the insurance provider will offer you help with a breakdown.

Conclusion:

You may seek your accountant’s assistance to ensure you claim your tax deductions properly. He will assess whether all the expenses have been included or not and make effective use of the investment property calculator. An expert will take into consideration the repairs and maintenance work as well. You need to undertake these works to repair a defect or to fix deterioration to the property. These tax deductions are claimed by landlords every year in Australia.

Bought an investment property late this financial year? Make it count, claim your deductions!

It doesn’t matter when you bought an investment property. You may have thought about buying the property a few weeks back before the financial year ends. But, in this case, it’s worth opting for tax depreciation schedules. While such schedules last for a longer period of time, these include the prime cost method apart from the diminishing value method. The report will give you the details of how much the investor can claim the tax depreciation. So, let’s take a look at how you claim the deductions in the financial year.

About cost write-offs

Now, let’s say, you own a property for only three months or days as on June 30. In this case, you can claim for an immediate write-off, pro-rate of building, and low-cost assets. But, if the building is 25 years old, then you can only claim a deduction of up to 2.5% ever year. While the deduction is on the original cost of the property, you can claim it up to 40 years. In case you don’t know the building cost, then you can approach a quantity surveyor. Apart from helping you with the cost, he would also able to assist you with the depreciation schedule.

But, regardless of what it might be, investors can foresee the best capital growth prospects in the years ahead. According to the property report, Melbourne, Brisbane, and Sydney are some of the locations where there’s a potential for growth.

About immediate write-off assets

Under immediate write-off assets, you can claim only for things that cost not more than $300. These include door closers, exhaust fans, smoke alarms, and other things you may not use often at the property. Additionally, if the price of the brand-new asset lies between $300 and $1000, then you can expect a depreciation of 18.75% for the first year. This deduction is done based on the original value of the asset. Under the category, you can expect the depreciation on ceiling fans, range hoods, garage door motors, and any other things.

 

When it’s time to change the infrastructure, this is the best time to buy any new items for the property. Moreover, after you install the item, you can claim the depreciation in the year’s Australian tax return. However, many individuals and accountants are unaware of how to claim the deduction. Hence, when you purchase the investment property, you should check for the depreciation deductions for the financial year.

Conclusion:

If the property is undergoing construction work, then think about buying it before June 30. If you buy the property beyond the date, then you may have to wait for a year to claim the deductions. Way ahead, once you purchase the property before the specified date, then you would able to recover some cost through savings. The savings refers to the amount you will make from depreciation. But, if you are planning to purchase a property, then you can seek a quote. This would give you a fair idea about whether you would improve the tax returns. For any queries, you could contact a team dealing in Capital Claims Tax Depreciation. You could also contact experts to get the details of depreciation residential rental property.