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5 Tax Saving Tips on Your Investment Property

When you purchase and own an investment property, it gives you the benefit of saving plenty of tax. You get the advantage of claiming the various expenses and some depreciation against your rental incomes. When you prepare your property depreciation reports, it helps in minimising your tax burden. You must ensure that you manage your investment in the right manner so that it yields you profit. Your investment should also help you achieve your financial goals. An intelligent property investor may adopt several strategies to reduce his tax and increase his tax benefit.

Given below are some key tips that will help you save tax on your investment property:

1. Manage your capital gains:

Capital gains created in a particular year can be reduced by offsetting it against capital losses that you face. If you are keen to decrease the capital gain on the sale of a property, you may think of selling any asset that lost its value. You get a 50% discount on capital gains when an asset is held for over 12 months. Since the saving amount is huge, you should consider the timing of any sale. It is worth noting that the important date for calculating your capital gains is the contract date instead of the settlement date.

2. Manage your capital losses:

The capital losses that you may face in any year can be extended to future years. You may adopt this procedure when there are inadequate gains to absorb in the similar year. The capital losses can be extended to future years for an unknown tenure. You will not be able to carry the losses back. Therefore, if you achieved capital gain, you can initiate a loss to offset it against. You may seek the help of experts to find out your exact property tax depreciation.

3. Claim building depreciation:

It is the depreciation that you may claim on the building itself. How you will be able to claim it will depend on construction costs.  For a large number of properties, you may claim 2.5 percent of construction for at least 40 years. You must be able to determine the construction cost. The ideal way to decide it is by hiring a quantity surveyor to make a property tax depreciation schedule for you.

4. Expenses incurred for visits to the property:

It is important to note that if you face expenses related to property visits, you will be eligible to claim them. They will help in boosting your returns.

5. Plant & equipment depreciation:

This is the depreciation of assets within the property. It will include things such as curtains, fixtures, carpet, etc. You need to upgrade or replace these things at some point of time as they tend to depreciate faster.

Conclusion:

You may claim the above expenses and reduce your tax burden every year. You must assess the tax depreciation life effectively during this process. If you are conducting any renovation or replacing something major, don’t forget to do a scrapping schedule. The quantity surveyor will be able to calculate how much value is left for a particular item. After that, you will be able to claim that in the form of depreciation.

The Lowdown on Quantity Surveyors

You will come across several professionals and experts in the property domain. They will leave no stone unturned in boosting the financial outcomes from your property portfolio. You may face several challenges in your investment. The relevance of tax depreciation quantity surveyors continues to rise. You will come across solicitors, building inspectors, accountants, and mortgage brokers to guide you through these challenges. A large number of buyers are aware of key advisors. However, you must have never heard about one professional as he hardly gets the credit he deserves. We are talking about quantity surveyor. Quantity surveyors are endowed with some special powers. They help you receive the maximum advantage of your investment.

Given below are some important details about quantity surveyors:

Role of Quantity Surveyors

They are independent construction experts who calculate and estimate the cost of construction. They possess the required knowledge for carrying out these tasks with expertise. They help in preparing budgets and check viabilities for projects. Quantity Surveyors analyze tenders and quotes for constructions. Their expertise allows clients to function with assurance and help them negotiate from a position of knowledge.

Advantage of Tax

If you invest in a property but without seeking a depreciation report prepared by Quantity Surveyors, you may face some challenges. Depreciation implies how much several materials, fittings & fixtures in your investment decline in value over a period of time. Quantity surveyors calculate depreciation on rental property. The kitchen that you install during your renovation will deplete in value over a period of time. Tax lets you deduct that loss you incurred against your income within specific guidelines. It implies your tax bill every year comes down. And, for individuals on PAYE schemes, there will be an attractive bonus in terms of an increase in the tax return.

Advantages of Quantity Surveyors

Quantity Surveyors offer you several advantages that you can’t overlook. Quantity Surveyors have the required expertise to find out several types of improvements that you may claim depreciation against. They help in claiming depreciation on property. Quantity Surveyors will undertake a detailed inspection of the investment to recognize and classify every item for depreciation in their report. They also find out capital works or plant and equipment. There are different laws that are applicable to find out the level of depreciation that may be applied. The various laws also help in deciding the rate at which depreciation can be claimed. The rules can also be swayed by how much you may spend on a specific item. For instance, a fan worth $250 can be claimed in complete right away while an AC’s depreciation can be claimed for several years. You may get confused when you read rules around tax. And, this is the reason why it becomes imperative to hire the services of a Quantity Surveyor.

Conclusion:

A Quantity Surveyor will help in solving all your tax and depreciation woes. They will prepare your investment’s tax depreciation report. They will include everything in that report and you may directly hand it over to your accountant. You will gain the reward of his vast knowledge. It is worth noting that the report will hold relevance for 40 years.

How Does Your Investment Property Reduce Your Tax?

You may find that at times earning money seems to be a never-ending cycle of earning, saving, and investing. And, tax time may be causing more hassles in the road towards wealth. You may seek the assistance of leading professionals at Deppro Depreciation to liberate yourself from this tax trap. Investment properties have emerged significantly in reducing tax. And, they offer you a vast range of benefits as well. They also provide potential to earn you money. Property markets have emerged to be quite stable. However, you may witness certain variations in prices and demand.  The most important fact is that everyone needs a property to keep them protected.

Given below are things that will reduce your tax:

1. Interest:

You will be eligible to claim interest levied on loans as a tax deduction when the concerned accounts are used for investment purposes. This may include interest accumulated via a mortgage on an investment property. It may also include money borrowed for purchasing shares or other loans concerned with investment portfolios. For instance, if you have a $500,000 mortgage for an investment property, where interest is levied at 5 percent/annum and paid monthly for 30 years. After 12 months period, you may have to shell out $15,542 for this loan amount. And, there will also be $15,541 tax deduction to counterbalance the cost of investment property.

2. Rental expenditure:

It is interesting to note that any rent amount that you get will be considered as taxable income. When you have acquired rental properties, you may claim various types of expenses to counterbalance the tax amount you pay every year. These expenses that you may claim include water rates, land taxes, gardening, pest control, insurance, property repair, and maintenance, etc. You will also be allowed to make claims for any travel that you indulge in related to your property. These may include rent collections and inspections. You need to prepare your rental property depreciation schedule to claim these expenses.

3. Holding costs:

These costs may be related to the buying of the property before anything is constructed. For instance, when you purchase land with plans to construct, you may have to pay interest on land. You will also need to pay interest on various phases of construction. These costs are classified as holding costs or what you need to shell out to hold onto the property before getting a tenant. These costs have emerged as one of the significant tax-deductible expenses when it comes to investment property.

4. Depreciation:

Tax deductions follow similar rules for depreciation of building claims. It is linked particularly to fittings inside the investment property. It may include things such as fans, power points, lights, showers, sinks, etc. These things are subject to wear and tear over a period of time. An expert building surveyor will be able to calculate depreciation costs on fitting and buildings. He will prepare a thorough tax depreciation schedule for you.

Conclusion:

Your investment property will go a long way in reducing your tax. So, when you buy a property it will offer your great amount of depreciation. You should consider buying those properties that will have higher depreciation. A wise investor will have the idea that they can buy many properties that will be able to pay for themselves. You should purchase new properties as they will have larger depreciation in the initial years. An expert quantity surveyor will help you in claiming depreciation on investment property.

All You Need to Know About Taxes on Rental Income

When you have secured ownership of an investment property, you collect rent from your tenants. It is worth noting that you must declare that portion of rental income on your taxes. You have the scope of deducting all the expenses that you incurred while maintaining your rental property. You must carefully check the Australian tax depreciation rules. Some of the common expenses that you may claim include maintenance costs, depreciation, and borrowing expenses. You will not be able to claim deductions for those things that your tenant/s paid for. Tenants pay for utility bills or improvement bills among other things.

If you have become a landlord recently and you are facing some complications, here is how you may avoid common tax mistakes:

You need to make sure that your property is available for rent:

You need to make sure that your property is actually available for rent to claim a tax deduction. Along with this, you must showcase a clear will to rent your investment property. You may advertise the property so that someone can rent for it. You should read in detail about investment property depreciation rules to remove all doubts. It will be ideal on your part to avoid unrealistic rental conditions.

Get initial repairs and capital improvements correct:

You will be able to claim for ongoing repairs that are linked to wear or tear or some other damages. The damages must occur due to renting out the property and you will be able to claim them in full. You can claim them in the similar year you faced those expenses. If you get the hot water system or a part of a broken roof repaired, these can be deducted right away. Initial repairs for damages that took place when the property was bought like replacing damaged light fitting can’t be deducted immediately.

Claiming borrowing costs:

If your borrowing costs happen to be more than $100, the deduction will get spread over five years. And, if borrowing costs are below $100 or just $100, you may claim the entire figure in the similar year you faced those expenses. Leading professionals fees, costs incurred in preparing will help you understand how depreciation for property needs to be calculated. Borrowing costs may include loan establishment fees, costs incurred in preparing and filling mortgage documents, and title search charges.

Claiming purchase expenses:

You will not be able to claim any deductions for the expenses you incurred on purchasing your property. These may include the conveyance cost and stamp duty charges. When you sell your property, these expenses will be used while working out whether you need to pay capital gains tax.

Claiming interest on a loan:

You may claim an interest in the form of a deduction if you take a loan for your rental property. If you use a part of that loan money for personal use, you will not be able to claim interest on that portion. You will only claim that part of the interest that is linked to the rental property.

Conclusion:

Therefore, we can conclude here that the above points will eliminate all your doubts pertaining to rental income. You may talk to expert Quantity Surveyors to understand depreciation rules for rental property. When a rental property is rented out to family or dear ones at below market price, you must know what to do in such a scenario. Many property owners face difficulty in this situation. It is worth noting that you may claim a deduction for that tenure up to the rental income you received. You must have proper evidence of your income and expenses so that you can claim for things you are entitled to.

5 Things Your Tax Depreciation Schedule Must Include

Sometimes your investment property tax deduction calculator may not display everything that you may claim. A large number of people tend to miss out on the assets that are included in a depreciation schedule. You may seek the help of professionals who have detailed knowledge of ATO property depreciation. When it comes to property depreciation, many investors tend to miss this deduction. You must understand that it may help you save thousands of dollars annually. Sometimes, investors do make claims but they do so by using an incorrect schedule. An expert quantity surveyor will help you to create a robust depreciation schedule.

Given below are five things that your tax depreciation schedule must include:

1. Scrapped items:

When you undertake renovations on your property, you may be left with some items of no use. Several people end up throwing these unused items away without thinking twice it. It is interesting to note that unused and old items have a scrapping or residual value – you will be able to claim a final depreciation sum on any such items that you plan to chuck out. These items are generally left after carrying out renovation works, such as old appliances or carpets, etc.

2. Common indoor equipment:

Individuals claim depreciation on their units’ assets. However, they may lack information about the assets that they share with the rest of the units in the apartment. You will be eligible to claim a deduction for your portion of those as well. A large number of investors miss these deductions every year thus losing savings. Deppro quantity surveyors will help you with these matters and eliminate your doubts. These common items are fire extinguishers, AC units, lifts, etc. You will also be able to claim deductions for ventilation and hot water units.

3. Common outdoor items:

You can also claim depreciation for common outdoor items as well. This may include fences, landscaping equipment like pergolas, pathways, etc. You will also be eligible to claim on a shared swimming pool in your apartment. Please note: it may not include some common outdoor items like plants or turf.

4. Design professionals’ fees:

ATO tax depreciation schedule has mentioned that your depreciation schedule may include fees of design professionals in your tax deductions. You need to ensure that you have provided your Quantity Surveyor with exact receipts for such services. This will help in maximising your claim for the fees you had to pay out of your pocket.

5. Money paid to the council:

You need to pay fees to the council for several services. These costs may include lodging application fees or obtaining council permission. While constructing your own property, you need to invest money into infrastructure, which may include footpaths or gutters. When you prepare the vital depreciation report, make sure to include these items.

Conclusion:

You should check your depreciation report and ensure that it includes all the items mentioned above. If you miss any items, you will end up missing out on many ATO tax incentives meant for homeowners. Get effective property valuation and seek the help of experts to create a correct tax depreciation schedule. And, save thousands of Dollars that you have been missing until now every year due to lack of knowledge.

Depreciation on Renovations – What Are Substantial Renovations and Do I Qualify?

Owning a property has never been an easy task. People might look at the security and income it provides however, they fail to notice the hassle involved in maintaining a property. The most common problem with owning property is the need to upkeep and maintain it regularly. Also, owning a property means you need to pay various taxes, and ensure you are staying updated with the latest tax laws. This blog looks at the sweet spot where both these issues converge. We will look at some nuances of the latest laws regarding a Federal tax depreciation schedule.

Recent Legislative Changes

Let us first take a step back and see what has changed recently. Earlier, the date of purchase didn’t impact the eligibility of claiming depreciation. Any depreciation on pre-existing plant and equipment was eligible. In 2017, the law was amended to state that owners were not eligible to apply for ATO depreciation rates for installations made by the previous owner. The present owner, however, was allowed to claim depreciation on renovations carried out.

Which Renovations Qualify?

The changed laws would be applicable only if the renovated property was then leased out. Also, the depreciation can be claimed only if the depreciation claim is made within six months of the property being leased out. The owner would be able to claim depreciation for both plant and equipment as also for capital works. The details of such renovations would need to be enlisted in the rental property depreciation report. Finally, there is another important point to keep in mind; after substantial renovations have been carried out, the property is also considered by this law as a new residential premises. Therefore, depreciation can be claimed on both elements of the property – renovated structure and new premises.

Let us see what kind of renovations would qualify for such depreciations. External walls, as well as interior supporting walls, are included. Similarly, renovations to the floor or the roof of the property also fall within the ambit of the modified law. Even if you are modifying staircases inside the house, you can claim depreciation for them. Some owners go deeper and even replace or remove the foundations of the structure. Even such renovations are eligible for claiming depreciation. On the other hand, it is important to remember that only ‘substantial’ changes would qualify. So if you have installed a new piece of equipment in your kitchen, it is likely not to be considered as a renovation. These fine points of the law might not always be easy for you to understand. This is why it is always recommended to use the services of a quantity surveyor. Such a professional can create a depreciation report in accordance with legal requirements.

Conclusion:

We still recommend that you utilise the services of a reputed consultant like Deppro, qualified and experienced quantity surveyors ensure that you do not miss out on any tax breaks that you are eligible for.

Differences in Depreciation between Houses and Apartments

Several factors need to be considered when calculating how much depreciation is required to be offered a particular property. Among those factors, the type of the property is one of the crucial factors that you cannot overlook when preparing a property report. It may be either apartment units or houses. Striking similarities exist when you calculate depreciation for both – houses and apartments. It may include the price of the property and the age of the property. You will come across differences when you take into consideration how the property was built.

Here are some essential depreciation differences between apartment units and houses:

1. Amount of Labor:

When you build an apartment unit and a house, the amount of labor will be more for an apartment. This is due to the multiple floors in an apartment unit. And, this is the reason why the apartment unit’s build cost is different from house with regards to capital works also known as division 43. It is specifically the case for new apartment units with several floors. Apartment units are eligible to claim a small portion of the common areas that helps in enhancing the depreciation further. This claim can be made under plant and equipment (division 40). This means that an apartment unit owner is eligible to claim the equal amount or more depreciation. You need to find out your depreciation residential rental property in accordance with the rules.

2. Plant & Equipment:

The next vital factor is the Plant & Equipment aka Division 40 – that these two types of properties may claim. Both apartment units and houses are eligible to claim plant and equipment costs. This includes light, blinds, shades, etc. Owners will also be able to claim a portion of common strata tools spotted in the common areas of an apartment which may consist of lifts, gym equipment, and fire extinguishers. These items can be claimed under Division 40 of Plant & equipment. These additional sources of depreciation permit owners of apartment units to claim higher depreciation in comparison to houses. You can prepare your tax depreciation schedules on the basis of these items. If doubts persist, you may hire a quantity surveyor.

3. High Cost of Construction:

Owners of apartment units will be able to get more tax deductions per year compared to a house owner. This is because of the higher cost of construction and eligibility to claim various strata items for apartment owners.

Conclusion:

An apartment unit will fetch higher tax deduction in comparison to a house. You may seek the services of a quantity surveyor who will carry out a site inspection. The quantity surveyor must have a vast knowledge of Australian tax return; which will help to establish the amount of plant and equipment items on the property and take measurements of the property and make vital notes to boost the depreciation schedule.

How Depreciating or Writing Off Older Equipment and Building Assets Works?

A major mistake that many investment property owners often make, is that they presume a few things about their property. One of those presumptions is they think their property was built years ago, so there will be no depreciation tax benefit. As per law, the capital works component of the property is eligible for the claim on properties where construction began post-September 15, 1987. Two vital elements come under consideration while calculating depreciation that may include capital works deduction and plant and equipment.

Given below are some crucial aspects that you should not overlook when it comes to depreciation:

1) Capital Works Deduction:

This refers to the structure of the building or any fixed items. It will include some items that will be categorised as capital works while computing depreciation deductions. These items are kitchen cabinets, windows, doors, walls, bathtubs, external decking, etc. And, you may calculate depreciation for structural items at a 2.5 percent rate per year for 40 years. It may start from the construction start date and as long as it started after September 15, 1987. Meanwhile, properties built before 1987 often underwent a few renovations. Older property owners will discover that they are still eligible for capital works deduction for renovation concluded within the enacted date. It does not matter if they were concluded by a previous property owner. Therefore, it is necessary to calculate rental home returns.

2) Plant and Equipment Assets:

These may include those items that can be removed in a convenient manner from the property. It may include smoke alarms, carpet, door closers, ovens, AC, light fittings, shower curtains, etc. A whopping 1500 items have been recognised as depreciable plant and equipment by ATO. The age of these items remains insignificant while calculating depreciation deductions available for a property owner. Every item has been allocated an individual effective life and rate of depreciation through which deductions shall be calculated. It is vital to obtain a tax depreciation schedule for rental property.

3) Old vs New Depreciation:

Let us comprehend the difference that a depreciation claim may make for owners of new, old and just built investment properties. Let’s suppose all properties bought at $4,60,000. The depreciation for properties of similar price and age may differ. It will depend on the size of the property, the number of plant and equipment assets in the property. Further deductions shall be applicable if there is some additional works or renovations carried out. The owner of a just constructed unit or home will get higher deductions than the owner of the old residential unit built after 1980. In the first financial year, the owner of the old residential house is eligible to claim $3,298 in depreciation. Meanwhile, the owner of the old residential unit may claim $3,846. After 5 years period, the owners of these properties shall get $12,357 and $13,576. These have emerged as substantial deductions that the owner of an old property must not overlook.

Conclusion:

The above points will help in depreciating older equipment or building assets. You must remember that if you destroy your current kitchen for upgrading to a new one, you may claim the existing items. You can seek the help of a quantity surveyor who may help you carry it out with a property depreciation schedule. For instance, rather than depreciating the old kitchen estimated at $4000 in the next 4 years, you are eligible to claim $4000 right away. They can also help you obtain the latest depreciation schedule for a new kitchen that can be claimed for 40 years.

6 Things That Affect Cash Flow When Property Investing

Cashflow maximisation is a very smart option if you wish to maintain your property portfolio. With having the stability of your cash flow situation, you can continue growing your portfolio. However, having a negative balance of cash flow can really restrict you from procuring more properties. Elements like tax depreciation can have an impact on such situations.

So how can you keep your cash flow in positives? Many investors perceive aspects like rent to be affecting their cash flow. However, there are six other factors that contribute to this.

1. Rent:

Rent is one of the smoothest ways to have a steady rental income thus have a better cash flow position. In order to maximise the rent, you need to make sure that the rental property has a substantial yield; and Also that the vacancy periods are minimized. Understanding the tax depreciation investment property may help to avoid extended vacancies.

Another way to avoid these vacancies is by procuring properties in capital cities because then there will be constant high demand.

2. Loan Repayments:

Cash flow gets really chopped off due to the loan repayment. A simple way to tackle this situation is by selecting a loan plan which is interest-only.
Since the property will be an investment the only goal will be to service the debt through the rent received. Taking a look at your depreciation schedule may give you some perspective.

3. Fees of Body Corporate:

We seldom get in touch with body corporate and it requires a hefty fee. However, it is better to completely avoid them since they can create a major leakage of cash flow. If you contact a professional for your depreciation on investment property ATO, he will furnish you with the same advice.

4. Council Rates:

Council rates are another medium to chop your weekly profits, that’s why you need to reduce them. The most optimal way to do so is by completely avoiding the high end of the given markets. Since that is where you will find the rates to be higher. Instead, use this money to have your depreciation schedule made.

5. Maintenance:

This is a very unpopular opinion but the maintenance cost is, in fact, the deadliest of them all. One of the most dangerous things you can do as a property investor is to buy an old property that requires hundreds of thousands worth of refurbishing and constant maintenance. Thus, it is better if you buy a new property.

6. Depreciation:

We have been hinting this throughout the post and we would finally like to talk about the importance of tax depreciation. People perceive depreciation as a deduction of value but what they miss out is that depreciation incurs a bigger tax return. Thus play smart here and buy newer properties since they get the most depreciation in the first few years.

Wrapping-Up:

We have spelled out everything you can do to increase that cash flow and keep it in the positive. If there is one takeaway we want you to have is to make use of that tax return on depreciation and get your depreciation schedule made.

Tax Deductions That Property Investors Can Claim

When you seek to achieve financial freedom, an investment property can be an attractive proposition. And, investment property comes with tax benefits. A landlord gets several options to bring down their annual tax bill. A large number of times, these deductions are the difference between a negative cash flow and a positive cash flow. Investors are eligible to claim deductions on their property for the period/s in which it was rented. And, they can claim a deduction for the portion of an expenditure that was used for business purposes. Therefore, they should calculate depreciation on rental property and prepare a record to prove all these details.

Here are the top tax deductions that property investors can claim:

1. Loan Interest:
Investors will be eligible to claim the interest levied on a loan for an investment property. They can also claim interest on any bank fees for servicing that loan. For instance, if you happen to incur $20,000 interest on your loan and $200 in loan fees, you can always claim them on your personal tax return.

2. Rental Advertising Expenses:
Landlords make efforts to find tenants and spend money on various types of advertisements. If you advertise your property using various online tools, brochures, and signs, you can claim them in the same year.

3. Land Tax:
If you have a rented home on your investment property, you use the land tax as a deduction. The tax and the timing may differ between states; the timing will decide when you can claim the cost. You may consult the tax advisor of that particular state to get an idea of the estimate tax returns. He will also let you know that you have claimed the right amount in the right year.

4. Strata Fees:
If your property happens to be on a strata title, you can also claim the cost of body corporate fees. If the fee includes garden expenditures and maintenance, you won’t be able to claim these expenses separately.

5. Capital Gains Tax Discount:
If you made a capital gain by selling the investment property, you must pay tax on profit. If you purchased and sold the property in a period of 12 months, the net capital gain gets added to the taxable income. It will raise the amount of income tax you will be paying. If you had possession of the property for more than a year before selling, you will get a 50 percent capital gains discount.

6. Building Depreciation:
Depending on when your property was constructed, you can claim a deduction on the depreciation of the building structure. You can also claim a deduction if you undertook any renovation on the property. You should have a clear idea about the allowable depreciation on rental property.

7. Stationary and Phone Expenses:
If you are a landlord, it is similar to running a business venture. You can claim deductions on phone costs, internet, electricity, stationary, etc. But, you must claim for that portion of these expenditures that relate to the investment property.

Conclusion:
You must have a clear idea of the various deductions that you can claim. As per the record of ATO, there are 1.9 million property investors residing in Australia. The country has a whopping 2.7 million rental investment properties. Every year, many property investors miss making claims of allowable tax deductions. It happens because they lack the awareness of all the expenditures they can claim as tax deductions. As a property investor, you should be aware of the tax deductions and Deppro depreciation to make the most of your investment property.