How to Claim Depreciation on Previous Owners’ Renovations

Many investors know that they are eligible to claim depreciation of building works they have carried out to a property. However, some don’t know that they can also claim depreciation of renovations done by former owners of the property. The claimable depreciation will depend on the property purchase date and extent of renovation took place. To claim depreciation, you need to consider a few factors like ATO depreciation rates, 2017 budget, etc. The 2017 budget is important as your claims depend on whether you purchased the property before or after the budget.

What if You Have Purchased a Property Before 2017 Budget?

Things won’t be complicated if you happened to purchase the property before the 2017 crucial budget. In such a scenario, you are eligible to make claims under Division 43 and Division 40 of the Income Tax Assessment Act. Division 43 covers the capital works undertaken by the former owner to the concerned property. It may also include all the renovation works such as a bathroom, kitchen restoration, building extensions, etc. It will also include any work carried out for building structure improvement. In other words, you can claim renovation work on the roof or walls done by the previous owner. You can also consult property depreciation consultants to make the process easier.

What if You Have Purchased a Property After 2017 Budget?

In this scenario, you are likely to face some complications. You will have to check the amount of renovation that took place or whether the previous owner did any renovation. Budget 2017 introduced the term “new residential premises”. You will get more details of the new residential premises in Goods and Services Tax or GST Act.

Importance of GST

You will come across the term “new residential premises” under section 40 to 75 of the GST Act. It means that the premises which have not been sold or rented out as a residential property prior to your purchase won’t cause any problems as the term covers new properties.

The Act further elaborates such premises as those that underwent “substantial renovation”. Such renovations mean removal or replacement of the entire building. And, installation of a new bathroom or kitchen won’t get inclusion under the substantial renovation.

How It Will Impact You?

If your investment property does not come into the category of substantial renovations, you can’t claim Division 40 depreciation. A new tool on its own is not sufficient to form a substantial renovation.

If the building underwent sufficient renovation to fall in the category of “new residential premises”, you can claim for Division 43 and Divison 40 work. In such a situation, a quantity surveyor will check the amount of renovation work done on the building. They will create a timeline of the building and create a house depreciation report. The report will cover the renovation work, cost, and extent of the renovation. You can use the report to check if your building comes in the category of “new residential premises” or not.

Conclusion:

It’s important for you to find out the exact date of your property construction. This will help you find out what earlier renovations you can claim depreciation. You can also seek the help of a quantity surveyor to develop a detailed report of property depreciation tax deduction

How Depreciation Works for a New Investment Property

When you buy or own an investment property, you are responsible for the maintenance and upkeep. But the property also becomes part of your assets, and therefore it gets linked to your tax liability, and therefore you should consider it as part of your investment property calculator.

What is Depreciation?

As per the principles of accounting, any asset loses value with time, and every year its value decreases, this is called depreciation. We see this most commonly when the value of an automobile is calculated by the insurance company every year before calculating the annual premium to be paid for its insurance. The value of the car is reduced every year, and the new premium is calculated as a percentage of this reduced value, not on the basis of its purchase price.

Benefits of Depreciation

The ATO allows property owners to get the benefits of the depreciation that their property suffers. This depreciation on investment property ATO can actually be claimed as a tax deduction while submitting the tax returns. For this, a process has been laid down by ATO, which requires the homeowner to employ the services of qualified professionals.

The Two Types of Calculating Property Depreciation

A building can have two aspects of the calculation of its tax depreciation investment property.

  • The first mode of the calculation of depreciation is on capital works. It includes all the expenses made on the construction of the building. This depreciation can be claimed over a period of forty years. This period has been decided based on the average expected lifespan of a newly constructed investment property.
  • The second mode of property depreciation is based on the value of the assets added to the building. This would include things like upholstery, furniture, electrical, and utility gadgets, etc. The list provided by ATO also lists the expected lifespan of each item. For example, a carpet is expected to last 10 years, while a kitchen stove can be expected to last two years more.

A Brief Process for Claiming Property Depreciation

The tax declaration would need to contain a detailed schedule for you to be able to claim both the types of depreciation listed above. A certified quantity surveyor would be required. This is because actual measurements and enumeration of every small and big component would be needed. Once the list is ready, the calculations can begin.

Based on the age of each component, and the rate laid down by the ATO, the total depreciation amount is calculated. Once the amount is final, then the amount of tax deduction applicable can be calculated.

Conclusion:

Many homeowners are not aware of the depreciation rules. If these rules are properly utilized, a homeowner won’t need to pay more tax than needed. A proper tax depreciation schedule for rental property can also prevent tax deduction being claimed twice for the same component. All that is needed is to utilize the services of a good consultant. The consulting company and its team of quantity surveyors will help you claim the right tax breaks.

Why the Depreciation Shake-up Gives Off-the-plan Investors an Edge at Tax Time

The year 2017 saw some changes brought about in the rules governing depreciation on investment property in Australia. The attractive option for claiming tax deductions due to the depreciation of the property value saw a cutoff date being applied – 9th May 2017. People who bought a second-hand property after date could no longer claim the deductions, as per the ATO regulations.
An Overview of Depreciation

We know that any asset undergoes wear and tear as it continues to be used. Accounting principles look at this reduction as a standard percentage of the value which gets reduced from the value of the asset. Under tax laws, this depreciation amount could be set off as a deduction from the tax payable. This would make a substantial change in the cash flows of a property owner. Based on the cost of the property, maintenance costs, reduction in value, and the reduction in tax payable, the depreciation could impact the net yield on investment property.
The New Tax Law

From May 9th onwards in the year 2017, second-hand property purchased would not attract the tax deduction. The only two categories allowable were new assets added to older homes and assets in new homes would allow admissible deductions. Those who were off this new plan could continue to claim under old rules. Also, capital works investments and fixed items added could still be claimed. But any assets that came along with the property went out of the purview of the deduction.
The Better Option between New and Second Hand

Because of this change, property owners needed to rethink their investment strategy. Back of the envelop calculations seem to present a clear picture. It was seen that a new property could work out much cheaper than investing in an older property of the same value. The detailed working of the investment property depreciation schedule ATO would provide a similar answer. What this does is to take the tax benefits out of the equation. So an investor should look at the cost-benefit analysis of the property only. Tax deduction benefits would cease to make a difference to the numbers. So how do the new tax rules affect the comparison between old and new? A property purchased in 2016 might turn out to be of similar value to a brand new property purchased in 2018. This needs investors to recalibrate their calculations carefully and in advance.
Conclusion:

In order to get the best property investment returns, an investor would need to calculate carefully. The best way is to leave it to the professionals. Consultants like Deppro could depute their qualified quantity surveyors to get the math right. They would set up the depreciation schedule according to the purchase date. The ATO has detailed lists of what can be claimed and for how much. These quantity surveyors would work out the numbers in accordance with these ATO guidelines. The amount that such a report would cost could ensure savings of higher amount if the calculations are done by a professional.

7 Questions You Should Ask Your Quantity Surveyor

Before that time of year rolls around again, when you have to file your tax return, you need to begin preparing your documents. While the income and expenditure are fairly straightforward, most people get stuck while preparing their tax depreciation schedules. That is why most people lean on professional tax consultants for this. If you own an investment property or a rental property, you may also require the help of tax depreciation surveyors who can make an assessment of your property and then prepare the submission schedule. Before you hire the services of such a surveyor, there are some important things which you should ask your quantity surveyor.

1. Do You Have Certified People Or Will You Outsource?

The survey work for property depreciation schedules can’t be done by just anyone; only certified and qualified surveyors can do it. But many tax consulting firms outsource the work of surveying to smaller firms. In such cases, you run the risk of having the survey done by someone who isn’t certified. Therefore, it is vital that you check with the firm as to whether they outsource any of their work.

2. Do You Have Insurance Coverage?

Surveying involves a whole lot of measuring at your property, for which surveyors need to often climb ladders or onto roofs. If they suffer a fall or any other kind of mishap, it would pose a major issue. That is why it is advised that you only hire firms who have insurance coverage.

3. What Are The Services You Provide?

The quantity surveyor tax depreciation only do the survey and measurements. After that their would need to prepare your returns as well. That is why you need to find out whether the firm you are employing only does surveys or can they provide end to end services.

4. Do You Have Any Questions For Me?

Every property has its own special features and would be differently treated by tax laws. Before the surveyor begins his or her work, you need to show them around and ask questions about your property. The answers to those questions and the surveyor’s own questions to you would tell you how well the survey would be done.

5. What Elements Would Be Included In The Depreciation Report?

Like we previously mentioned, a quantity survey is the start of your tax declaration and claims process. The Deppro quantity surveyors would finish their job and hand it over to their colleagues who would complete the rest of the process. You need to know from the surveyor what elements he or she will include in the report because that would determine the tax deduction amount.

6. What Categories of Properties Do You Handle?

It is important to learn what kind of properties their firm specialises in. There are firms which would be doing the surveys for commercial or industrial properties only. So, they might not have the required expertise regarding residential properties. It is preferable to work with someone who knows their stuff.

7. What Is Your Fee Structure?

Last but not the least; you need to know how the surveyor would charge their fees. There are some who charge a flat fee, while there are others who charge as per the square feet area of the property. There could be some others who charge a percentage of the total amount in the depreciation schedule.

Conclusion:

Asking the above questions will not only help you know how professional your quantity surveyor is, but it will also help you learn some extra information about your own property.   If you think there should be some more questions which are important to ask your quantity surveyor, please let us know so that we can share those with our readers and customers in our next post.

Discover the Benefits of Claiming Depreciation for a Commercial Property

A person buys additional properties with the plan to monetize the assets. This is usually done by renting these out. But many people are not aware that their property can provide monetary benefits outside the rental income too. These benefits are in the form of possible deductions in tax. This blog post will discuss the different aspects of depreciation tax benefit.

How Depreciation Affects Tax?

We all know that an asset has more value when purchased than the same asset a few years later. This common knowledge is called depreciation in finance and accounting syntax. Depreciation refers to the diminishing of the value of any asset with each passing year. When it comes to residential properties, this reduction in value is made up to some extent by the Australian tax rules. The ATO guidelines allow property owners to claim a deduction in tax amount on the basis of this reduction. This deduction is calculated as per the extant investment property depreciation rules.

The deduction in tax payable is applicable to the following two types of assets on residential properties:

1. Capital Works Deductions:

This is the deduction applicable to the capital assets of a property. In simpler language, it refers to the immovable part of a building, like walls, floorings, tiles, doors and windows, wiring, etc. The only thing a house owner needs to keep in mind is the cut off date for the enforcement of this legislation. All properties constructed after 20th July in the year 1982 would be eligible for this deduction. Capital works deductions on properties constructed before this date would be eligible only for repairs, renovations, etc.

2. Plant and Equipment Depreciation:

This is the second way under which claiming depreciation on investment property is allowed under ATO guidelines. This is applicable for all the removable parts of a building. In the ATO guidelines, a complete list of around 1500 such items is provided. Some examples are upholstery, electrical gadgets, air conditioners, etc. A typical building is considered by the ATO to have a useful life of 40 years. But the movable assets listed under plant and equipment have much smaller life spans listed under the guidelines.

Why You Need a Professional Help for Claiming Depreciation?

Most people consider basic financial aspects while purchasing an investment property. But if one considers the tax benefits from the depreciation perspective, the picture changes a lot. The problem with these calculations is that a layman might not be able to do them accurately. A professional company would be able to help in the following two ways:

  • Before purchase, they would help with the calculations of the tax implications of depreciation.
  • After purchase, these companies and their teams would help file tax returns accurately, taking depreciation into consideration.

This is why most prospective buyers consult these experts before the purchase decision.

Conclusion:

A home can be a financial boon in more ways than we think. Experienced and dependable consultants like Deppro can help an investor maximise tax savings by creating an accurate depreciation schedule. They could also ensure that multiple deductions are not claimed by mistake.

Depreciation Schedules – By Independent Property Inspectors

Depreciation refers to the decline in value of a commodity or an asset. In terms of tax depreciation schedules, the term corresponds to a tax deduction or compensation for wear and tear caused to a piece of property. Rented houses, that constitute the property of taxpayers, have a tendency of suffering damages in the course of time and thus the term depreciation comes into action.

Depending on the value of a property, the property depreciation schedule of a piece of property can amount to a significant amount of money for a property owner. Whether a property is new or old, the compensation for its renovation does amount to a certain value. Keeping this in mind, a property owner must try their best to do everything to lay a claim on the tax deduction of mending or renovation.

How Does a Tax Depreciation Schedule Benefit a Property Owner?

A tax depreciation schedule is prepared by a quantity surveyor and it consists of all the components that are eligible for depreciation. The amount of money you invest for the improvement of property comes under tax exemption. That is to say, you will not be taxed for the amount of money that you invest in enhancing its value.

An important thing to bear in mind is that it is easier said than done to meet the requirements of ATO. Hiring a qualified quantifier surveyor is a good idea to make the most of an investment property depreciation schedule ATO. Though you can consider approaching an accountant, a quantity surveyor would be able to provide you with an accurate calculation.

What Amount of Depreciation Can You Expect From Your Property?

ATO tax depreciation schedule is more complicated than what it looks like on the surface. One needs to get to the bottom of the facts in order to gain a proper understanding of the value of tax depreciation for a piece of property.

An important thing to remember is that the value of depreciation depends on the age of a property. Thus, it can vary from one property to the other. Further, your property will be eligible for recovery of compensation only if you have built it after 1985.

Tax depreciation in connection with a property does not cover the land on which it stands. Even if your property was built before 1985, you can receive depreciation on all Plant and Articles.

Final Thoughts:

It is important to conduct the depreciation of a property due to a variety of reasons. Firstly, it necessitates a property owner to carry out a thorough inspection of their property. This can help an owner identify all the existing problems in their asset.

Further, it also encourages an owner to promote the value of a property with the assurance that the costs for improvement will not come under the slab of taxation. A piece of property which undergoes maintenance and improvement from time to time remains in proper shape for long-term use.

6 Important Duties & Responsibilities a Quantity Surveyor You Should Know

Australian tax depreciation consists of a number of aspects. It is easier said than done to fully understand the legal elements within it and therefore make an informed decision based on one’s understanding. Most home owners consider hiring a quantity surveyor to ease the workload.

A quantity surveyor discharges numerous responsibilities on behalf of their client. They undertake the following duties and responsibilities:

1. Cost Estimating:

This role involves observing all the minute details related to a building and evaluating them to estimate the possible cost of its construction. A surveyor takes design preferences and the regulations into consideration in order to come up with the right cost estimate.

2. Cost Planning:

Cost planning is all about a comparison between the actual cost of constructing a building and the budget for the project. This not only throws light on the problematic areas but also enables owners to come up with the right kind of documentation.

3. Cost Studies:

The dynamics of the real estate sector are changing day by day and the trend is likely to remain that way in the upcoming years. Quantity surveyors use cost studies to study the difference in costs between two similar projects. They prepare a tax depreciation report based on it to help their clients formulate the right kind of budget plan.

4. Time Management:

Punctuality is a vital element of success for every business endeavour. And it is all the more important in the case of construction and the real estate industry. A quantity surveyor evaluates all the factors linked to the construction of a building so a project can be executed within a given timeframe.

5. Payments to Stakeholders in Time:

It is one of the important responsibilities of Deppro quantity surveyors to take care of the payments to stakeholders in a timely manner. This lends a helping hand in avoiding disputes related to payments.

6. Timely Visits to the Site:

An analysis of the progression of a project is one of the imperatives of the success of a project. It makes perfect sense on the part of an investor to invest in a project which is doing well. At the same time, it is also important to identify poorly performing projects and look for opportunities for cost savings.

A qualified quantity surveyor holds discussions with all the stakeholders to find out if things are working fine. Thereafter, they share the updates with their clients based on their findings.

Conclusion:

The above duties and responsibilities highlight the important role of tax depreciation quantity surveyors for both existing and potential owners of properties. They are the virtual assistants who make things simple and easy.

Do You Really Need A Quantity Surveyor?

Every team engaged in construction has different specialists with different skillsets. One of the most important and interesting roles is that of a quantity surveyor. This role combines the knowledge of engineering and finance. People argue whether all construction projects need a project surveyor or not. In our opinion, every project should have one. But there is another area of work where the role of quantity surveyors is even less understood.

Tax Returns and Quantity Surveyors

Australian tax rules state that owners of investment properties should file tax returns. This process requires qualified and experienced tax depreciation surveyors. So, let us properly understand the process of property tax. This way, the importance of quantity surveyors can become clearer as well.

When you own a property, there are two types of additions to that property.

  • The first is capital goods, which indicates the permanent structures.
  • The second refers to the extra items which are removable.

Good tax depreciation quantity surveyors can list all the elements of your property. After this, they distribute them into these two categories.

The Contribution of Tax Surveyor in Filing Tax Returns

The reason we need quantity surveyors for this is not only to create a list. With their training and experience, they would be able to put the correct pricing on each item. They can also calculate the depreciation allowable on each item. This would be according to Australian tax rules. Based on the quantity survey, the quantity surveyor tax depreciation list gets created. It is then made part of the owner’s tax returns. The right work by the quantity surveyor would ensure that tax is not paid when unnecessary. It also ensures nothing important is missed during the filing of returns.

The Importance of a Quantity Surveyor

This was only an example of a specific job that is impossible without a quantity surveyor. If a non-qualified person does it, there could be financial and legal implications. But if we talk about general construction teams as well, we can’t ignore the role of a quantity surveyor.

Conclusion:

The cost and efforts involved with hiring qualified Deppro quantity surveyors might be high but they get repaid because of their contributions. This holds true not only in general construction work. It is especially true in specific jobs like tax returns and depreciation lists. The benefits of hiring a professional quantity surveyor are most usually in financial aspects. But they also help in ensuring that the technical aspects are correct too. If your project team does not have a quantity surveyor yet, it is high time you consider it.

Are You Missing Out On Tax Depreciation Claims?

So many Australians miss out on property tax deduction claims every year. Tax depreciation on property investment is a legitimate deduction which the government allows you to claim. Due to the of lack of information on investment property depreciation rules, tax savings worth thousands of dollars are missed out.

Claiming for a tax deduction on the value of your property seems difficult but with the help of a professional expert, it can become really easy. Claiming depreciation can make a huge difference in a property investor’s cash flow. Despite all of this, it is most often missed.

That is where DEPPRO comes in.

What can be Done to Not Miss Out on Tax Depreciation Claims?

In Australia, only 30% of property investors claim deductions for the depreciating value of their property. It is nothing but a non-cash expense which you can claim every year on your property depreciation. You do not need to spend any cash to make this claim.

You are claiming on the declining value of your building or asset. Of course, there are certain conditions like any other tax deduction. If you have a residential property which was built before 1985, then you can claim depreciation on Division 40, Depreciating Assets only. But if it was built after 1985, then you can claim under Division 40 as well as Division 43.

The Tax Depreciation Schedule

A Quantity Surveyor is an official who is professionally qualified to produce a legal tax depreciation schedule by the ATO. It includes the following two divisions:

  1. Division 40: Depreciating Assets: This element of property depreciation schedule is all about assets like plant and equipment, lights, fans, carpets, floating floorboards, smoke alarms, air conditioners, refrigerators and so on. Every item which has a diminishing life is included in this. The tax deduction calculation, according to the investment property depreciation schedule ATO, is carried out based on the effective life of the items.
  2. Division 43: Capital Works Allowance: The immovable parts of the structure like the building, walls, roof, swimming pool, built-in furniture, toilets etc. are a part of this division. The investment property depreciation rules state that this capital works allowance is calculated on the basis of the construction cost of the building and not the current purchasing price. So if you are buying a property, you can claim a deduction based on the original construction cost while the building was made.

How Can DEPPRO Help You?

We have been in the industry for more than 12 years now and have a passion for tax saving. Our team has industry-leading skills and can assist in all areas of investment property taxations. We are always updated and are well-versed with all the latest Australian Taxation Office (ATO) rulings, investment property depreciation rules, and interpretations for our clients.

The property depreciation schedule made by us ensures that our clients get maximum tax benefits and at the same time it complies with all the latest ATO regulations. If you have the property of your own and make money owning it, get a qualified surveyor immediately to perform a tax depreciation schedule. We have offices all over Australia. Contact the one nearest to you today!

Is it Worth Obtaining a Quantity Surveyor Report?

Have you invested in a rental property in Australia which was built in a year preceding 1987? If so, then things might be different for you than for those who bought their property in the following years. You may be confused in regards to getting a tax depreciation report from one of the qualified tax depreciation surveyors in your city.

Is obtaining a quantity surveyor’s report worth the effort, time and money? Read on to find out.

What Does a Depreciation Schedule Involve?

A quantity surveyor is a dedicated professional who works on depreciation schedules and the capital allowance of investors. When they complete both, it includes two essential elements: equipment depreciation and capital work deductions.

What Is Capital Works Deduction and Why Is It Important?

Capital works deduction is a form of tax deduction which relates to the structural aspects of a building. These include irremovable or fixed assets like tiles, doors, sinks, windows, walls, roof, etc.

Because it is next to impossible to remove these assets, capital works deduction, in the tax depreciation reports, assumes its importance. This prevents an investor from feeling the pinch on their finances at the subsequent stages.

Is there any Hard-and-Fast-Rule Related to Quantity Surveyors which one Needs to keep in Mind?

For the successful generation of these reports, it is imperative that tax depreciation quantity surveyors, who undertake the responsibility, are registered tax agents. This is all the more important in view of the fact that the information in the document relates to particular tax advice.

How Getting A Quantity Surveyor’s Report Helps?

According to the current version of tax legislation in Australia, any residential or commercial property built before September 15, 1987, and July 20, 1982, respectively, are not eligible for deduction.

As a result, an investor may not even consider the need to obtain a surveyor’s report if their date of purchase of property does not make them eligible for it.

However, it is a good idea to enquire about the possibility for a deduction, even if the property in question is 100 hundred years old. Owners of old properties carry out renovations more often than not, and this makes an investor eligible to make depreciation claims after its purchase.

A new buyer can file a claim for it in the event the previous owner carries out any repair or renovations on it after the aforementioned dates for residential and commercial properties.

So, as you would have come to know, getting a depreciation report is your best bet to make a claim for it in a timely manner.

Whether it is ATO guidelines or other tax depreciation laws in Australia, things keep changing from time to time. Therefore, it is a good idea to get in touch with depreciation service firms such as Deppro Perth. While you may spend a little in terms of fees, the dividends it may pay can make it worth the investment.