10 Commonly Overlooked ATO Tax Deductions

Taxes are especially painful to small and medium sized enterprise owners. Neither do they have the scale of a large company nor the agility of a startup. But the tax rules are equally applicable to such business owners. This is the reason such business owners often fret about their tax burden. If you are one such person, you should be happy to know that we have good news for you. There are several legal tax deductions that are allowed by the Australian Tax Office.

List of the Commonly Overlooked ATO Tax Deductions

Here is a quick list of Australian tax depreciation and other allowed deductions:

  1. Any new or second hand assets purchased for your business can help reduce your taxable amount by as much as $20,000 AUD. This is different from the fixed assets listed on your property depreciation tax deduction.
  2. Any Union fees paid can be reduced from taxable income under the D5 clause.
  3. All donations of $2 AUD or higher are actually eligible for exemptions. The conditions are that these contributions are made to charitable organisations.
  4. If you operate your business from home, it can provide some relief as well. Remember that this is different from the tax relief your home can provide in your tax depreciation schedule. Here we are talking of the occupancy cost that you incur for running your business from your home. Your expenses on printers, computers, and even licensed software could be claimed under this head. The only condition is that they have been used solely for your business.
  5. In case you are paying any insurance premium, there might be good news for you. This depends on the kind of insurance taken. It should be a policy to prevent loss of business income. Other regular insurance policy premiums cannot be claimed, though.
  6. If you are educating yourself or upgrading your knowledge, the expenses are protected under the ATO rules. This would include expenses like textbooks, professional journals, related travel etc., just to name a few.
  7. This is a good one. If your work is mostly outdoors, and you spend a lot of time in the sun, then there is something for you as well. All expenses on sunglasses and sun shades are considered as expenses made for the protection of your eyes, and can be claimed.
  8. As a business owner, connectivity costs are very vital but sometimes can be quite steep. No business owner can survive without spending money on internet connection at all times, or on mobile phone expenses. The good news is that these too can be claimed.
  9. Say you have employed a tax consulting agency to help you prepare your investment property depreciation schedule ATO. The expenses on fees etc. can also be duly claimed as legitimate business expense.
  10. We’ve left the scary one for last – no business is ever insulated from the bad times. In case your business suffers financial losses in any year, the tax rules also allow you to claim relief on those losses. That’s what they call a silver lining for a dark cloud.

What Are the Different Ways to Calculate Depreciation?

For a company that owns assets, the annual asset reduction is reflected in its financial statements like the balance sheets and the tax depreciation reports. There are different ways in which the value of depreciation is calculated. This depends on the country or region, of course and the calculation method could depend on the type of a particular asset. Let us understand this with the example of strata corporations with five or more strata lots. They need to obtain a specific strata property act depreciation report.

Let us look at three different ways to calculate depreciation.

1. Straight-Line Depreciation:

This is a single dimension calculation. The basis of the calculation is the estimate of how long the life of a particular asset. The straight-line depreciation method assumes an estimated value of the asset after the passage of those many years. After that, it is a simple matter of subtracting the final value from the original value to get the amount of depreciation.

2. Sum-of-the-Years’ Digits Depreciation:

In this method, the useful life of an asset is calculated/estimated. The numbers of each of these years are totalled. So, if an asset has a 7 year estimated span, then the sum would be 7 + 6 + 5 + 4 + 3 + 2 + 1 = 28. So the rate of depreciation in the first year would be 7 / 28 = 25%. The second year’s depreciation would be 6 / 28 = 21%, and so on, till it depreciates by less than 4% in its last year.

3. Declining Balance Depreciation:

There is a difference in the ways in which the above two ways affect the depreciation amounts listed on an ATO tax depreciation schedule. The first one shows a uniform rate of depreciation throughout the expected life. The second one assumes a higher rate of depreciation in the initial years. This reduces as the years go by.

The declining balance depreciation method also takes in much higher depreciation in the initial years. The depreciation on any asset is usually written off the owner’s tax liability. That is why this method tries to write off the depreciation costs faster. The logic behind this is that most assets are more useful in their initial years.

Conclusion:

The interesting thing is that there are several more methods of calculating depreciation. The second even more interesting thing is that the rates and depreciation calculated by each of these methods would be different. That is why the services of an experienced and capable company like Deppro Victoria should be used. They have experts who would understand your business and your accounting styles. Accordingly, they would suggest the best way of calculating depreciation and claiming tax breaks.

 

Why You Need a Depreciation Schedule for Your Investment Property

Savvy investors, nowadays, indulge in property investment with the prospect of re-selling the property at higher prices. While this investment decision is highly fruitful, a little know-how of the field can help in making the most of the opportunity.

Depreciation on property is one such aspect that has to be taken into consideration. With the know-how of property depreciation, information on tax depreciation schedules is also vital.

What is a Tax Depreciation Schedule?

Depreciation on a property comes from the fact that as a property ages, its components may suffer from wear and tear. The test of time inflicted upon the property leads to a decline in value. Tax Office provides claim to investors against this depreciation.

In order to claim depreciation from the Tax Office, investors require preparation of investment property depreciation schedule also known as a tax depreciation schedule. The preparation of the schedule should be done by a qualified surveyor, who will make a list of all the depreciable items in the property.

The inclusions in the depreciation schedule will be: depreciation on building allowance; depreciation on equipment; on plant; and, precise calculation of each depreciable item. Depreciation on investment property ATO approval is a must. For which you need professional help to draft it for you.

Preparing a Depreciation Schedule

Property depreciation schedule 80 reflects the numerous benefits of having your property’s depreciation schedule developed, which are as follows:

  1. Creation of tax depreciation schedules on a rental property allows the owner of the property to claim renovations done by the previous owner. The owner can also add any new improvement made on the house into the existing schedule.
  2. Beside the approval of claim, the preparation of schedules allows the owner to weigh their subsequent property investments. Investment property calculator can help them to find out the most lucrative properties in terms of depreciation benefits.
  3. Preparation of Property depreciation schedule 80 allows the owner to claim depreciation on building allowance. This means that the owner will get tax benefits upon the building’s structure like the brickwork, roof and timber work.
  4. Depreciation on plant and equipment can become highly lucrative with the aid of depreciation schedules. This is because it covers those items that can be detached from the investment property. Such items cover as high as 35% of the complete cost of a residential building
  5. The benefits of tax depreciation schedules also include improvement of cash flow. This is owing to the reduction of taxable income. Wealth creation gets much easier when the money has been freed up. These further properties can of course be weighed using Investment property calculator.

Wrapping-Up:

It’s the owner’s responsibility to both deduct the depreciating value upon their property as well to claim it. It is not the ATO’s job to remind them. Depreciation on investment property ATO can be a game-changer for an owner’s investment opportunities. Also, property owners should not forget to use the aid of a qualified quantity surveyor for creation of the schedule on their investment property like Deppro QLD.

 

 

How Rental Property Depreciation Works

Investment in rental property has emerged a beneficial financial decision. A rental property can be a stable source of earning for beginners. One can reap tax benefits as well on the rental property benefits. You can cut the rental expenditures from the earning of rental income thus bringing down your tax liability. Meanwhile, the other important tax deduction meant for depreciation works in a different way.  Depreciation can be defined as a process which is used for deducting the expenditure of purchasing and renovating a rental property. Instead of taking a single deduction in the year you buy or renovate the property, depreciation distributes deduction throughout the life of the property. Given below are the factors how depreciation for residential rental property works:

1. Which Property is Depreciable?

You must find out first which property is depreciable. As per the rules of IRS, you can depreciate the property if:

  • You are the owner of the property even if it is liable to a debt.
  • You are using it for any income-generating act or business purpose.
  • Property has got a determined useful life and loses its worth as a result of natural factors.
  • The property may last for more than a year.

2. When Will Depreciation Start?

When a property falls in the category of service or is ready to use as a rental property, you can apply depreciation deductions. You may continue to depreciate the property until any one of the conditions mentioned below are met:

  • If you have deducted all the cost or other bases in the concerned property
  • You leave the property from service even if you could not recover the entire cost or other bases. The property will be retired from service the moment it is not being used as an income-generating property. When you destroy it, convert it or leave it, the property will be retired from service. The property report will provide more information regarding when the property may be retired from service.

Depreciation methods:

There are three factors that will help you decide the amount of depreciation you will be able to deduct every year. These methods are the basis in the property, recovery period, and depreciation method.

Given below are the basic steps:

  • Determine basis of the property: Basis of the property is the cost of the property or money you shelled out in cash or mortgage to buy it. Settlement fees, closing costs which may include legal fees, transfer taxes, etc. are included in the basis.
  • Separate land cost and buildings: You can only depreciate the cost of building and not land, so you must calculate the value of each to depreciate the exact amount. You may require the help of experts to prepare a rental property depreciation report.
  • Decide your basis in the house: When you find out the basis of the property and value of the house, you will be able to find out your basis in the house.
  • Decide adjusted basis if required: There are possibilities that you may need to make an increase or decrease to your basis for some occasions. The occasions may take place between the times when you purchase the property until it is ready to be rented.

Final Thoughts:

Depreciation has emerged as a useful method in case you invest in rental properties. It distributes the cost of acquiring the property in the coming years and brings down every year’s tax liability. However, rental property laws witness frequent changes. Therefore, you must work with an expert tax accountant when building, operating or selling your rental property. They will also explain all of the important details of depreciation residential rental property which will prove extremely helpful.

Getting Help with Investment Property Depreciation

Quantity surveyors play a crucial role while dealing with investment property depreciation schedule. Many people may find it confusing when they have to deal with something that includes the term depreciation. They assume that depreciation means a decline in value so they link it to something very negative. But, when it comes to an investment property, depreciation will actually be in your favour as long as you tread the path cautiously. So, let’s just say, you have an old property in your possession and you are exploring ways to make optimum use of it. In such a scenario, you may either repair or renovate the old property or just resell it. Here you must know that renovating your old property can yield you great benefit as a result of tax building depreciation.

Here are some important factors:

1) Many people sell their used property and remain unaware that they can apply for property tax depreciation against taxable income. The tax claim can be made in two ways. First one is plant and equipment. It covers taxable objects used inside the property. These objects may include air conditioner, laundry machine or any other machinery. However, deductions for the plant and equipment items will be applicable if you purchased the property before May 9, 2017. Tax claims can be made through building allowance. It covers all the construction expenditure for those properties constructed before 1985.

2) In order to apply for tax entitlements, you must hire a quantity surveyor who will carry out all the work for you. The work of a quantity surveyor mainly includes organising the depreciation schedule which can validate the tax deductions. The expert quantity surveyor will prepare the property tax depreciation schedule. As you cannot avoid payment of repairs and renovations on an old property, you can get most of the cost back by paying less tax.

3) A quantity surveyor will help you in evaluating your property and prepare a depreciation report. The report will be presented at the tax office for reference. The expert quantity surveyor will make a big difference in how big or small tax benefit you will receive. If the surveyor prepares a comprehensive report covering all minute details, you may receive a great tax benefit. The expert quantity surveyor can effectively organise a depreciation schedule for investment property.

4) The quantity surveyor will carry out a physical inspection of the property. It will allow him to record all of the legal entitlements in the report. They ensure that the tax depreciation report includes all depreciable assets so that they cost it accurately.

Conclusion:

So, it is important to hire an expert quantity surveyor who has the right legal information and technical expertise. All Quantity Surveyors should follow the tax laws and other ATO guidelines. You can then work with the surveyor on the depreciation schedule and report. The expert surveyors will assess the depreciation rates for all of the assets. It will help them determine if you are permitted to a write-off rate. So hire the best quantity surveyor who can estimate tax returns for you from Deppro, Australia.

Why You Should Consult a Quantity Surveyor

Many people are not aware that they can get a deduction from their taxable income through a property depreciation schedule. You can secure deductions from construction cost and plant and equipment allowance. Construction cost includes the costs pertaining to the property. Property and equipment allowance includes the removable assets discovered within the property. And, both construction cost and property and equipment allowance are subject to depreciation. They are also covered by the tax depreciation schedule for investment properties in Australia. You can find many leading tax depreciation surveyors in Australia, in particular at Deppro QLD.

Below are some of the reasons why you need to consult with a quantity surveyor in order to reap maximum benefits:

1) The Expertise of Quantity Surveyors:

Quantity surveyors have expertise in preparing an investment property depreciation schedule period. It is applicable for the property built after September 1987. Neither your real estate agent nor your accountant can assist you with this. However, you may ask for their advice. Quantity surveyors have the required information and experience to calculate the accurate value of your property and tally it with tax regulations.

2) Professional Guidance:

Another valuable service that quantity surveyors offer is that they will guide you with all the details of claiming depreciation from the tax office. They will help you find out that can you claim depreciation on a rental property and how much? Many end up missing the important chance as they filed for the property depreciation claim after the last date. The availability of a qualified quantity surveyor will ensure that you do not face such issues while filing a property depreciation claim.

3) Maximum Benefits of Tax Depreciation:

They will let you know how much of a deduction you will receive against your taxable income through the property depreciation schedule. The trustworthy and expert quantity surveyor will include all the deductible objects to gain maximum benefit as tax time arrives. The surveyors have expertise in finding out allowable depreciation on rental property.

4) Accurate Cash Projection:

Quantity surveyors help you avoid certain risks and hazards related to some calculations which provide rough estimates. They make correct cash projections which will allow you to plan your budget effectively and ahead of time. With accurate cash projections, you will not have to face any unpleasant surprises. You can stay away from the redundant financial obstacles such as overpaying for construction materials.

5) Reduce Expenses:

Quantity surveyors can easily handle all costs linked to civil engineering and building projects. They overlook both the site work and office work and their main objective is to reduce expenses and keep them under the budget. They achieve their objectives without making any compromise on the quality of the product and they adhere to all the safety regulations.

Conclusion:

Expert quantity surveyors take an active part in projects and work with clients or contractors from the very beginning to prepare detailed estimates of the project. Many times, they collect tender and contract documentation, carry out the required feasibility studies, and risk control processes. As soon as the building project begins, they track everything that may cause cost variations. Quantity surveyors are experts in exploring opportunities that will save money. So hire the best quantity surveyor tax depreciation today and maximize your benefits.

The Advantages of Hiring a Quantity Surveyor

Are you searching for leading tax depreciation quantity surveyors in Australia to inspect your property? They play a vital role in calculating all the depreciable objects. They ensure that you do not miss out on any deductions. The major responsibility of a quantity surveyor is to carry out a measurement and cost assessment for building and construction projects. Here are some advantages of hiring a quantity surveyor:

1. They will extend their support when you need it:

Construction projects may become cumbersome if you have to complete research, paperwork, estimation, etc. all on your own. A qualified and expert quantity surveyor can take up estimation and costing exercises effectively. Deppro quantity surveyors will give you the accurate advice and assurance that you require. They will help you find out the material required, projected labor hours, and ensure that all engineering and architectural plans are all accurate and of course, legal. They will provide you all the correct guidance so that you do not get misled.

2. Project management:

The quantity surveyor has emerged as a vital part of successful project teams. They can manage the paperwork effectively and they extend their services in planning, regulatory approvals, budget, concerns related to the environment, stakeholder management, etc.

3. Effective cost management and budgeting:

A successful project depends on effective cost management and proper budgeting. Building and construction projects can turn out costly and incur additional cost due to poor planning. It becomes essential to hire a qualified quantity surveyor as they carry out a thorough analysis of your project to manage the costs and provide you advice on maintenance costs, depreciation reports, and calculating tax refunds.

4. Feasibility assessment of property:

After successful completion of the project, the quantity surveyor will assess the feasibility of how you will use the property.

5. Depreciation schedule:

As time passes, the various fittings and fixtures in your newly built property may depreciate. Therefore, it is crucial to prepare an accurate depreciation schedule to take advantage of tax savings and several other benefits. Deppro Qld can assist you with any queries and questions you might have about their professional Quantity Surveyors and how they can help you.

Conclusion:

Quantity surveyors play a crucial role in construction projects in Australia. They can effectively aid in the management of the project. Quantity surveyors help in preparing a property depreciation report. They are also popularly known as construction cost consultants. Get in Touch with Deppro QLD today to learn more and book your Quantity Surveyor.

What You Should Know about Property Depreciation

Most of us begin our real estate affairs without any knowledge of property depreciation. However, knowledge about the term may prove advantageous in the long run, particularly if you have owned a property for a long period of time. In short, investment property depreciation can decrease taxes that you may have to pay as tax time arrives. You can also claim depreciation tax on various other things as well which may include the vehicle that you have been using for generating income. Similarly, you can also seek benefit from real estate property tax depreciation. Your sound knowledge on depreciation for tax purposes will prove beneficial for you.

Here are some important things you should know about property depreciation:

1. Is your property too old for claiming depreciation?

If your residential property was constructed after July 1985, you can still claim building allowance as well as plant and equipment. However, if construction began before the aforementioned date, you will only be able to claim depreciation on plant and equipment.

2. Should your accountant prepare this report?

In case your residential property was constructed after 1985, your accountant will not be allowed to assess construction costs. Neither the real estate agents nor the solicitors can estimate the construction cost. You should be aware of the important details of the tax depreciation report and tax ruling 97/25 issued by ATO.

3. How can you claim depreciation for your property?

It is essential to obtain a property depreciation report. A qualified quantity surveyor will help you secure that report. The surveyor is an expert in estimating the cost of any property. They are qualified enough to prepare a depreciation report even if construction costs are not known.

4. Will you require scrutinizing your property?

It is essential to obtain site inspections which satisfy ATO requirements. The expert quantity surveyor will make sure that all of the depreciable objects are calculated along with their images. It will ensure that you do not skip any deductions. In the scenario of an audit, the documentation will prove useful and can be used as evidence. Quantity surveyors communicate directly with the property manager or tenant so that least interruption is caused to the tenant. They have expertise in preparing tax depreciation schedules and other essential reports to keep you at ease.

5. Will you be able to claim depreciation if the property is renovated?

Yes, however, you must know exactly how much you spent on renovations. In case the earlier owner carried out the renovations, you can still claim depreciation. If the cost of renovation is not known, the expert quantity surveyor will make the estimate.

Final Thoughts:

You can find some of the best-qualified quantity surveyors in Australia at Deppro. They will offer their services at cost effective prices and will not create a hole in your pocket. You can also find a Deppro contact number online. Get in Touch with the depreciation specialists today.

Busting the 7 Myths of Depreciation Schedules

When it comes to tax depreciation, many myths have been floating around specifically regarding what property investors can claim. As you are aware, tax depreciation can benefit any person with an investment in assets or property. And, there are many who are not aware of the depreciation rules for rental property. You need to work out how much your investment property depreciates to claim these values during tax time. A tax depreciation schedule helps in making your rental property work for you. Here are some common myths of depreciation schedules below:

Myth#1: Commissioner’s actual life ruling needs to be utilised for all assets without any exception

Truth: The Commissioner of Taxation’s ruling is only applicable to the new depreciable property. The role of a quantity surveyor is to boost the depreciation deduction for his client. In order to achieve this, he must calculate the actual life of the second-hand assets. He should not assume that all the assets available in the property are brand new. If the asset is depreciable, you can always claim it.

Myth#2: If the assets in the property get damaged, you won’t be able to claim the balance of depreciation

Truth: Division 43 capital works mentions that if taxpayer’s capital works get damaged, the deduction will be available under Undeducted Construction Expenditure.

Myth#3: On the recovery of a depreciable asset, you can claim depreciation on it

Truth: As many investment homeowners use their property at some stage during the year, incorrect figures may surface in their tax depreciation schedule. The main motive of a tax depreciation schedule is to notify the taxpayers on what they may include in a tax return. It may be illegal or misleading if you don’t check whether or not the property was used for private purpose. You must figure out how to adjust the depreciation amount to the right sum.

Myth#4: All the expenses in obtaining a rental property will be able to get depreciated

Truth: The quantity surveyors consistently find any asset to link any and all expenses to claim a deduction without following the laws. It is wrong. You should claim a repair 100 percent only in the year in which it took place.

Myth#5: Once you have spent money on an asset or a capital work, you are eligible to claim it

Truth: As per Division 40, you should start depreciating the asset only when it is ready for use or already used. You should not start to depreciate it from the exact moment when you purchase it.

You can claim deductions only once construction gets over for capital works under Division 43.

Myth#6: If you can’t find depreciable assets in the Commissioner’s yearly ruling, you won’t be able to depreciate it

Truth: The purpose of the Commissioner’s ruling is to assess the exact lives of assets. Not to calculate what is a depreciable property. A depreciable asset is an investment property with a limited effective life. And, they may dip in value with time. Make sure that you are aware of the ATO property depreciation rules.

Myths#7: Your assets get deducted consistently at a 2.5 percent rate

Truth: The rate at which assets get deducted almost always remains at 2.5%. But, at one point of time, you can get a 4 percent rate. The 4 percent rate will be applicable on the income-producing usage of a building with regard to an industrial manner.

Conclusion:

You can seek the help of a quantity surveyor to prepare a detailed house depreciation report. The quantity surveyor will not only help in busting your myths but also maximise your depreciation deductions.

Best Reasons to Invest in Commercial Property

Most people dream of owning their own home. Those who can cross that first hurdle, often go on to their second or third home. Obviously, they do not plan to stay in all of them by turns. The subsequent purchases are for investment purposes only. They give the owner the option of renting or selling it outright for a profit. Additionally, whether you rent or sell, it also gives an option of claiming depreciation on property. There is another option that is popular with investors – commercial property. In this post, we are going to try to help you understand the implications of commercial property investment.

Tax Benefits

The first thing any investor looks at is whether a particular investment brings any relief from tax. A commercial investment property offers tax deductions in two ways. The first is on the capital works expenses made on immovable parts of the property. The second is the depreciation due to plant and equipment. This refers to additional fixtures and fittings that you have spent money on. If you can prepare an accurate and detailed depreciation schedule with the help of a professional, you can indeed save a lot of tax.

Robust Yields

The primary reason for any investment is to sell at a price higher than the purchase price. The property tax depreciation mentioned above is only a bonus. But it is not the most important benefit of investing in a commercial property. The most important benefit is the better returns it usually provides on resale. This is especially when you compare with the average returns of investing on a residential property. This is the primary reason why discerning real estate investors always prefer to deal in commercial properties.

Low Initial Investment

We know that the rental income from a commercial property would be much higher than a residential property. In spite of this, the initial cost of a commercial property is much less. This allows you to begin investing without a very large corpus.

Conclusion:

The purpose of this Deppro review is not to compare the relative merits of investing in a commercial property vs. residential property. We only seek to highlight some of the best reasons to invest in commercial property because many of them are less known to investors. If you are an investor, then you must surely keep commercial properties as part of your portfolio.