Top Depreciation Claims for Property Owners in Australia

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There are various ways in which landlords can save money when paying their annual taxes. But in most cases, they end up paying hefty taxes due to a lack of information about the eligibility of filing depreciation claims. Hiring experts can help them go a long way in saving taxes leading them in a win-win situation.

Here in this post, you will get to read a list of the top tax deductions that you can claim for your property:

1. Installed appliances depreciation

If you have installed appliances at your home, such as dishwashers, air conditioners, washing machines, etc., the owners can consider claiming deductions based on the effective life of the appliances.

2. Maintenance and wear and tear

If you have spent a sum on the upkeep of your property that occurs due to wear and tear, you can claim depreciation for the building based on the amount invested. May it be a broken roof struck by a storm or a broken window due to a tree fall, all can be put up for a property depreciation claim.  

3. Strata title

People who are in possession of multi-storey apartments and subdivisions stand eligible for strata title. Holding a strata title makes the owners eligible for claiming the amount that they paid as corporate body charges. The body corporate fee is levied on owners who own apartments, multi-story buildings, duplexes, townhouses, etc. Also, the owners can put up a depreciation petition for maintenance and garden development in such cases by including them as strata fees.

4. Property loan interest charges

If you have taken a property loan while buying your property, the interest amount levied on the same can be filed for tax depreciation. The principal amount cannot be claimed, but the interest amount for the full loan size can be put for Deppro depreciation.

5. Building depreciation

If you have made any renovations to your building, you can claim the same on your property. Buildings that have been built on or before 16th September 1987 do not stand eligible for depreciation claims. On the contrary, buildings that have been constructed after that date can be put for a depreciation claim. All you need to do is to hire a professional who will make use of investment property calculator to come up with the best cost-cutting solutions.

6. Cost of advertisement for a rental property

If you are planning to rent out your property using any of the advertising methods such as brochures, print media, signboards, etc., then there is some good news for you. Now you can claim for the advertising cost that you have invested to rent your property to a tenant.

Conclusion:

There are various other depreciation claims that you can make apart from the ones mentioned above. To gain a better understanding of such claims, you can consider seeking advice from property depreciation consultants.

Planning to demolish your existing property to construct an investment property? Consider these factors

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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.

Development application:

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.

Occupancy certificate:

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.

Conclusion:

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.

How Multiple Owners Increase Depreciation Claims

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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.

Conclusion:

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.

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

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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

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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.

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

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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?

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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.

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.

How Claiming for Depreciation Boosts Property Cash Flow

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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.

Conclusion:

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.

Everything You Must Know About Commercial Property Depreciation Deductions

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In today’s era, entrepreneurs face many significant challenges. Professionals need to access everything immediately when business owners try to increase cash flow. But, to boost cash flow in a better way, the companies and commercial landlords have to update the depreciation schedule. So, as you read ahead you will learn more about the commercial property depreciation deductions. But, before moving ahead, let’s check out the results we got from some of our commercial clients.

Results depending on the industry

As for small workplaces, the claims for the financial year 2020 were equal to $18,004. This was quite less than the claims for the first 5 financial years, which was $58, 597. But, on the contrary, for those who own small warehouses, the claims for the year 2020 and across the first five financial years were $6,603 and $29,222 respectively. As for the results for city commercial building, the claim across five financial years was as high as $448,111.

How do professionals calculate the depreciation on commercial property?

As for the calculation, depreciation differs for different types of commercial buildings. Feel free to seek help from professionals if you are unsure about the depreciation on investment property ATO.

The first step to calculate the depreciation is classifying the buildings depending on the purpose. Later, the ATO comes up with depreciation rules for every type of category. There are many factors that can affect the rate of depreciation. These factors are applicable to buildings that fall under Division 43 and Division 40.

On the whole, the total depreciation a person can claim is divided between Division 43 and Division 40. Usually, professionals use the Prime Cost Method to calculate Division 43 depreciation. However, they use the Prime Cost or Diminishing Value Method to calculate the depreciation for Division 40 assets. Besides, Division 40 assets can come under the low-value pool based on the effective life. The classification would also matter on the maximum tax depreciation deduction done earlier.

How can a person claim property depreciation deduction?

When you need to claim the deduction, you must contact a quantity surveyor. As the professional presents a depreciation schedule, you can observe the amount you can claim every year. But, your claim would depend on the value of the commercial building. It may also vary due to the decline in the value of the income-generating assets. According to the rules of ATO, the surveyor should come up with a depreciation schedule only for buildings built after September 1989. The schedule would come into the picture even when you are unaware of the property’s construction costs.

As for the fees, you only have to pay for just one depreciation schedule. Once the surveyor coordinates with you, he would work out the assets that would depreciate in the future. The schedule is further sent to an accountant, for effective calculation of deductions. The accountant then considers the equivalent amount for the annual tax returns.

Conclusion:

If you have any questions regarding the depreciation deductions, then you need to reach out to tax depreciation professionals. In order to predict the tax depreciation investment property, you use the investment property calculator. But, if you’re an investor, who wants to maximize returns, then you could go through the depreciation reports. You can research online and avail the report which is available online. Apart from everything else, you can also seek answers for questions pertaining to capital gains.

Claiming the Maximum Deductions Out of Your Rental Property

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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.