Never Miss These 6 Commonly Overlooked Tax Deductions

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Building owners often neglect some of the most recent ATO tax deductions available to them. If you desire to minimize your tax this financial year you must never leave them from the list.  The ATO has permitted owners of income-generating properties to claim ATO property depreciation deductions. An individual may claim depreciation under two categories namely capital works and plant & equipment assets. These depreciation claims can significantly help the building owners in reducing their tax liability and they will pay less tax. The ideal way to make sure that you enhance your depreciation claim is to prepare a tax depreciation schedule.

Here are some of the most ignored tax deductions:

1. Borrowing expenditures:

When you buy your investment property first the borrowing expenditures included can be claimed as tax deductions. These expenditures may include title search fees, mortgage documents costs, loan establishment expenses, etc. If your entire borrowing expenditure exceeds $100 or less, you can claim a complete deduction in the income year they are incurred.

2. Property management fees:

If you procure a real estate to handle your investment property, you may need to pay property management fees. It is worth noting that these fees remain tax-deductible and you may claim them in your yearly tax return.  If you face any difficulty in carrying out your property valuation to seek a depreciation claim, you may hire an expert for the job.

3. Legal expenditures:

ATO has specified that legal expenditures incurred while buying or selling your property are not tax-deductible. However, an investor is eligible to claim any expenditure faced while evicting a non-paying tenant.  You need to take court action due to loss of rental income or seek damages claims for harm caused by a third party on rental property.

4. Insurance:

When you claim rental income on your investment property, your insurance will also become tax-deductible. The insurances that remain tax-deductible may include private mortgage insurance, building, or content. You may engage an expert quantity surveyor to complete an ATO tax depreciation schedule.

5. Advertising expenses:

You will be allowed to claim a real estate tax deduction for the advertising expenditures. However, it will be possible if you are an agent or property manager who earns a commission and have yet to be reimbursed. It may include expenditures linked with advertising via newspapers, drops, bunting, etc.

6. Home office expenditures:

If you are working from your home, you will be allowed to claim occupancy cost as a tax deduction. It will also include expenditures of using your own computer, equipment, lighting, heating, and software, among others. But, you will not be able to get complete the main residence exemption in case your house is your main place of business.

Conclusion:

Whenever you prepare your tax depreciation report, don’t forget to include the above expenditures. It will help in lessening your tax liability in every financial year. If you face any difficulty in preparing your tax depreciation report, you may get in touch with expert Deppro quantity surveyors. The professional quantity surveyors will prepare a schedule that will cover all deductions available throughout the lifetime of the property. It will ensure that your cash flow is maximized and remain fully tax-deductible.

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.

Why Units and Apartments Generate Great Depreciation Deductions for Investor Owners

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Depreciation in real estate is one of the most common and crucial tools for rental property owners. This gives way to deduct down the costs included in buying and property improvement measures. This, in total, tends to turn quite useful in life, lowering down the taxable income of the individual in the concerning process. Property investment returns are the biggest concern of individual’s planning an investment in the real estate sector.

However, tax deductions are highly dependent on the depreciation deductions concerning any property. Investor owners willing to invest in real estate units and apartments often tend to fear the great depreciation deductions associated, herein.

Key Features Concerning Depreciation Deduction

  • Depreciation is used by property owners for deduction of the costs involved in buying and improvement of the property.
  • As soon as the units or apartments are put in service, depreciation begins.
  • Most of the units or apartments start depreciating at a particular rate over the concerned period of time.
  • However, it is very important to understand the fact that the depreciation only concerns the building value and not the land.

Investing in Apartments in Australia

Most of the Australian investors choose apartments and unit developments options as the prime part of their planned property portfolio.

The main reason behind the same is both, the probable estimate tax returns and less investment.

However, some of the major reasons for the same can be listed as follows:

  • Lesser purchase cost
  • Lesser maintenance on an ongoing state
  • Favourable return in terms of rental yield
  • Very attractive for the tenants as it accords favourable affordability, lesser maintenance, and nearby central locations.

Apartments and Units and Their Depreciation Deductions

  • Similar to all other properties, there is quite a substantial tax deduction that is claimed in the case of apartments and units. Especially, in the case of new and recently built property units, this holds strong.
  • Based on the years of establishment, the depreciation schedules of the property might vary for owners all across Australia.
  • In order to get the well worth tax claims, the depreciation value needs to be kept in might as per the brand new or second-hand belonging.

How is Depreciation Deduction Calculated?

Depreciation deductions are primarily calculated on their respective rental property in the following two forms:

  1. i) Over the already constructed works: This includes the overall building subject to walls, doors, ceiling, windows, etc.
  2. ii) Over the inclusive assets/fixtures and fittings in the house: This includes geyser system, air-conditioning, cooktop, etc.

Apartment owners have the right to claim their entitlement over the common areas of their apartment/unit development. This makes them eligible for claiming over the construction cost and shared assets’ cost.

This means one can claim deductions over the depreciation of their share over the inbuilt facilities of the property. Driveways, basements, carparks, landscaping, pools, gyms, etc are some examples.

However, in case of purchase of a second hand holding after May 2017, the owner isn’t liable towards claiming any annual depreciation.

On the contrary, they own the right of claiming the annual depreciation while selling the property even for a purchased second-hand apartment, bought after May 2017.

Boosts Deductions in Terms of Apartments/Units

·      Higher the construction cost of the apartments/units, higher the deductions

  • One of the prime facts about the multi-level aspect of an apartment/unit is that the construction cost per square metre is generally higher as compared to any other standard residential house.
  • With the depreciation of the constructed works being in complete tune with the construction cost, higher construction cost always tends to offer higher deductions for the correlated depreciation, every year.

However, in order to maximise the depreciation claims, one needs to get in touch with a quantity surveyor. This helps in creating the right estimate tax returns and overall property depreciation tax deduction trails, as well. Right from inspecting the property to collection information and concluding the Capital Allowance and Tax Depreciation Schedule, they help in all.

What Tax Deductions Can I Claim on My Rental Property This Financial Year?

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You are eligible to claim a deduction against your present year’s income for expenses pertaining to the maintenance and management of the property. It will also include interest on loans. Many people enjoy depreciation tax benefit in Australia and reduce their tax liability. When you desire financial freedom, an investment property appears to be a lucrative proposition, in particular with tax benefits. A landlord has got several ways to reduce his annual tax bill. These deductions are generally the difference between your negative cash flow and positive cash flows. Investors will be able to claim deductions on their property during tenures in which the property was tenanted or remained available for rent.

Here some crucial tax deductions that you must never overlook:

1. Interest expense:

If you sought a loan to buy a rental property, you can claim a deduction for interest charged on loan. But, the property should be tenanted or must be available for rent in the income year. Meanwhile, you will be permitted to claim interest on the loan you used for buying a depreciating asset for the rental property. It will also include any repairs you made to the rental property as a result of storm damage. Additionally, you will be able to claim the interest you have pre-paid approximately 12 months in advance.

2. Pre-paid expenses:

You can also claim a tax deduction for any pre-paid expenditure you incurred in the current year. Pre-paid expenses can be defined as expenses that provide for services covering beyond the existing income year. It may include payment of an insurance premium on January 1 that offers cover throughout the calendar year. You will be able to claim an instant deduction for prepaid expenses of less than $1000. You may claim a deduction in case expenses of $1000 or more where the service period remains 12 months or less. And, if the prepayment does not fulfill these criteria, then they may need to spread for yet another two or more years. It is important to get in touch with an expert to prepare a property depreciation schedule.

3. Repair and maintenance:

You will be eligible to claim an entire deduction for the expenses of repairs and maintenance in the year you incurred them. However, the expenditures must be directly linked to wear and tear or other destruction caused due to renting of property. Some examples of repair may include replacing broken windows, parts of fence, machinery or electrical appliances. Examples of maintenance will include repainting damaged interior walls, maintaining plumbing, etc. You need to calculate precisely tax depreciation schedule for rental property.

4. Strata fees:

If your property happens to be on strata title, you will be allowed to claim expenses of body corporate fees. However, if the fee contains maintenance and garden expenditures, you will not be able to claim these expenditures individually.

Conclusion:

You may claim the above-mentioned expenses and bring down your tax liability. Everyone wants to enhance his/her rental home returns in Australia and leaves no stone unturned to seek claim of potential expenses. Your land tax can also be claimed as a tax deduction. If you face any confusion regarding which expenses can be claimed, you may speak to your accountant. An expert accountant will help you find out your claimable expenses.

Negative Gearing: Everything You Need to Know About It

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Negative gearing is a term for describing a circumstance when money earned through an asset is less than the expenses for holding the asset. The term applies to any kind of investment. The expenses include the fees for managing the property, the interest on the investment loan, depreciation, and more. In case you hardly have the time to manage your tax return Australia, then you need to contact an accountant. So, as we check how negative gearing works, you can read ahead to know the advantages of positive gearing.

How Does Negative Gearing Work?

Whenever an investor negatively gears a particular property, he can claim the overall loss as the investment loss. The accountant considers the equivalent loss while filing tax returns. Moreover, the accountant deducts the loss from the current taxes, but with some restrictions. Even though the investors don’t aim at negative gearing, it helps them to realise long term capital gains. The loss also helps to regain intermittent losses for a short term. This, in turn, helps to pay off less loan and increase the rent till the situation changes.

Before moving ahead with negative gearing, the investors should be financially stable. This would assure them to cover up for the shortfall until they sell the property. On the other hand, in case the floating index is an aspect to calculate interest, then investors can expect low rates. If you are unable to determine the asset value for a year, then refer to the tax depreciation tables 2015.

Advantages of Negative Gearing

The main advantage of negative gearing is that it helps to reduce the overall tax. It helps the investors to focus on returns for the long term instead of cash returns for a short time span. In case the situation is not negatively geared, then it’s better to ensure that the property income is more than the expenses. This leads to manage the property in a better way and spend little on maintaining the property.

Some investors may add on that negative gearing may improve the rental affordability and impact the property supply. But, ideally, this aids to lower down the purchase price as well as the rent.

Disadvantages of Negative Gearing

Among the disadvantages, negative gearing leads to reducing tax payable. But, such a loss comes under negative cash flow. Hence, it is not appropriate for investors who wish to earn more through a passive source of income. With no extra money, the investor may lose the property due to debts not paid on time. You could claim tax refunds on rental property if you’re seeking ways to save on tax.

With the ever-changing market trends, negative gearing may lead to higher risks. In fact, the investors may have faced a lean phase when they rely only on capital gains. However, a positive cash flow assures the investor about gaining profits even when the property value declines. Later, the investor may think about reducing the limit as per their borrowing capacity. This makes it difficult to move ahead and grow their portfolio.

Conclusion:

Before making a decision, the investor must get in touch with an expert to learn more about the strategies. This can help them to pace ahead with their wealth-creating journey depending on the financial and personal goals. Once they get in touch with a professional, they don’t have to bother with the yield on investment property. They can also check out for a depreciating schedule to learn more about the tax returns.

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.

4 Important Things That Your Tax Depreciation Schedule Must Include

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A depreciation schedule has emerged as something that every individual investor must invest in. It can assist you to reduce the tax you need to pay apart from enhancing the return on investment for your property. When you decide to claim depreciation on your investment property, you will require an investment property depreciation schedule. And, the federal tax depreciation schedule must be prepared with the help of an expert quantity surveyor. The expert will be listing your entire depreciable items that may include effective life that remained in every item. The reason why it must be prepared by a quantity surveyor is that they have been recognised by ATO.

Here are some of the crucial things that your tax depreciation schedule must include:

1. Common indoor items:

A professional quantity surveyor must include common indoor items while preparing a tax depreciation schedule. You are eligible to claim depreciation on your unit’s assets. And, you can also claim for assets that you share with other units in the apartment complex. However, you will be allowed to claim your share of those assets. These common items may include fire extinguishers, AC units, and lifts, among others. You will also be entitled to claim for ventilation and hot water systems. Expert quantity surveyors from Deppro can effectively prepare your depreciation schedule and minimize your tax liability.

2. Scrapped objects:

When you carry out renovations on your property, you may be left with some assets that don’t have to use anymore. Many people tend to dump the scrapped objects sans giving any second thought. Old objects have a scrapping and residual value. You will be eligible to claim a final depreciation sum on an object that you plan to chuck away after renovation.

3. Common outdoor objects:

You can also claim depreciation on common outdoor objects. It is because any object outside the apartment does possess value to you. It may include the fences, pathways, several landscaping objects like pergolas. You can also make a claim on a shared swimming pool too. These items will find their way into your depreciation schedule. However, you may not be able to claim for every common outdoor object. Meanwhile, you must be continuously updated about the ATO depreciation rates.

4. Design professional’s fees:

It is worth noting that you may include fees you paid to your design and construction expert in your tax deductions. Your depreciation schedule should account for the expenses of these construction works. It will include the amount you paid to a designer who conducted work on the project.

Conclusion:

The above expenses will help to maximising your claims. The expert QS will help in preparing your rental property depreciation report. Meanwhile, don’t forget to include the money you paid to the council. As you need to pay fees to the council for several services. These are the expenses that you may incur with lodging application fees or securing council permits. If your building is your own property, you may have to spend money on infrastructure. So, your depreciation report must include the above expenses.

Benefits and Shortcomings of Renting a Furnished Property

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

Disadvantages of renting a furnished property

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

Advantages of renting a furnished property

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

Depreciation benefits for a well-furnished property

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

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

Bottom Line:

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

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

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

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

1. Depreciation deduction:

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

2. Claim cost of schedule:

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

3. Partial year claims:

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

Conclusion:

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

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

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

What is exactly property depreciation? Is it beneficial?

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

Capital works and its association with CGT

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

CGT and equipment depreciation

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

Can investors file for a discount?

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

Does property depreciation claim add to capital gains?

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

Types of CGT exemptions for people who reside in the property

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

Conclusion:

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