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Why Does An Apartment Obtain More Depreciation Than A House?

You must be wondering how come an apartment fetches higher depreciation deductions in comparison with a house. When you speak with leading property depreciation consultants they will tell you differences in property depreciation between houses and units. It will be useful for property investor to find out how a unit gets more depreciation deduction than a house. When you look at depreciation deductions, various things may impact the final calculation. It will consist of property’s purchase price, construction beginning date, settlement date, land value and fitting & fixtures’ value inside property. As a result of infrastructure amount involved in construction of residential unit compared with a residential property, the entire claim can be significantly impacted.

Let us check the various factors below:

More fixtures and fittings:

Units tend to include a larger number of fixtures and fitting when compared with a house. It therefore lets the owner claim against several items inside the units. It may include lights, carpets, and dishwashers. Additionally, unit owners will also be allowed to claim for a part of common property. It has been defined by Australian Taxation office (ATO) as spaces inside a complex or development shared between owners. It will include things like pools, driveways, external furniture, fire stairways, and lifts. Shared property has been recognised as one of the most vital difference between houses and units for the purpose of depreciation. However, one may claim deduction for them in select states. You may use an investment property calculator to carry out your estimates of depreciation.

Maximise your deduction:

It is advisable to maximise your available deductions. You will only be able to do it by seeking the services of a professional Quantity Surveyor. An expert Quantity Surveyor has the adequate information, knowledge, and capacity to identify depreciation deduction in a precise manner. Property investors find it difficult to secure exact depreciation deduction estimates for an investment property. And, above all, the ATO will not identify property investors’ figures in a tax return. When you hire a Quantity Surveyor, he will ensure maximum available deductions for you.

Role of Quantity Surveyor:

A Quantity Surveyor will carry out a site inspection to identify the exact number of plant and equipment items. Only then he will be able to provide these deductions. He will also be taking pictures, measurements, and crucial notes to boost the depreciation schedule. A Quantity Surveyor is the right person to find out the exact investment property depreciation schedule ATO. A Quantity Surveyor will also decide the exact share of common property that the property investor is eligible to claim. It will be based on a few factors. These factors will include size of unit, position within the development and also the view.  A Quantity Surveyor can do so just by having a glance at the development’s building plans.

Conclusion:

Investment in an apartment will secure more depreciation than investing in a house. It is interesting to note that any fee of a Quantity Surveyor is 100 percent tax deductible. So always seek a Quantity Surveyor’s consultation to boost your depreciation claims. When an investor will be audited by the ATO, his depreciation claim will get supported by proof of documents. If you find it tricky to calculate depreciation for residential rental property, seek guidance of an expert Quantity Surveyor.

10 Tax Deductions You Didn’t Know You Could Claim From the ATO

Sometimes we may end up missing some of the vital tax deductions and enhance our tax liabilities as a consequence. One of the vital tax deductions is claiming depreciation on a rental property. Many individuals in Australia find it a highly profitable business to invest in rental property. It allows them to claim various deductions. Sometimes individuals may claim some deductions but they either tend to forget them or lack awareness about them. You must keep records to ensure you accomplish the best possible tax return.

We have prepared a list of top 10 tax deductions that you may claim from the ATO:

1. Sunscreen Protection:

Australian Taxation Office (ATO) accepts sun protection tax deductions for sunglasses when an employee gets exposed to UV rays. This expenditure has emerged common among outdoor workers that may include gardeners, electricians, or construction workers.

2. Shoes:

You will be eligible to claim for the expense of shoes that are an essential part of your office uniform. The uniform may be obligatory or non-obligatory depending on the organization you are working for. Work boots used by construction works are also tax-deductible. You may speak to Deppro Perth for more details on this kind of deduction.

3. Home office:

If you are a worker but working from home, you may claim a tax deduction for costs linked to those works. These are also known as home office running expenditures, phone and internet costs.

4. Handbags:

Handbags, being used for office work, will be eligible for a tax deduction. And, women will get several reasons to purchase a new handbag. ATO has recently confirmed that handbags can be claimed on tax provided they are used for office work.

5. Guard dogs:

ATO claims if you have an actual guard dog who offers security to your property, you may claim a deduction for it. As it is a little controversial, you may speak to Deppro QLD to eliminate your doubts.

6. Artworks:

When you purchase artwork for your office, you will be able to enjoy a tax deduction on this expenditure. Whether it is for the company’s cafeteria or meeting room, the write-off rules will be applicable to it.

7. Gym tools:

You may claim a tax deduction on equipment such as pool tables, ping-pong tables, etc. It is important that you have made their purchase to keep the workers healthy and fit.

8. Media subscriptions:

Products that are linked to your business such as publications or media subscriptions will be tax-deductible. It may also include magazines and journals.

9. Meals:

You will be allowed to claim tax deductions for overtime meals. It may include food and drink on overtime.

10. Bad debts:

If you repay your employer cash shortage or client bad debts, you will be entitled to claim a tax deduction for such amounts.

Conclusion:

According to Deppro tax depreciation, the above 10 expenses will be eligible to claim deductions that you have ignored for long. It will bring down your tax burden every year. Sometimes, many individuals lack the awareness of the type of expenses that may be claimed. When you operate your business from your house, you may claim a part of your home insurance. Car insurance will also be tax-deductible in case you use your personal car for work.

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.

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.

Own a Rental Property? Know Your Tax Deductions

Rental properties are a very lucrative investment opportunity for those involved in real estate. Apart from creating a property as an investment, it also turns the investment as a regular source of capital from tenants. However, rental properties also come with some significant taxes. But if you are smart enough, there are ways to save on the taxes. Let’s take a look at how you can claim tax refunds on your rental property.

Capital Gains and Tax

Before we delve into claims about tax deductions, we must understand an important concept: Capital Gains Tax. A capital gain is when the selling price of a property is more than its cost base. A capital loss is the reverse; the selling price is less than the cost base. The CGT is applicable when you derive capital gains from selling your property.

To minimize your CGT, the straight route is showing the capital gains as low as possible. There are perfectly legal ways to do so, primarily by including all possible expenses into the base cost of the property. You can also apply for capital losses from previous years if any. Creating the investment property depreciation schedule and capital works schedule is another way.

Tax Deductions You Can Claim

There are a variety of expenses you can claim for tax deductions, like:

  • Advertising expenditure for finding tenants
  • Any interest incurred over property investment loan
  • Insurance of the property
  • Travel expenses incurred while traveling to inspect your property (subject to scrutiny)
  • Water costs
  • Council costs, if any
  • Management fees of your real estate, if you hired professional help for the same
  • Deprecation on residential rental property assets like air conditioners

While it seems straightforward, being able to claim these tax deductions come with certain requirements. For starters, you must maintain all physical bills and/or bank statements for transactions covered above. Two things must also be maintained accurately: depreciation schedule and capital works schedule.

The depreciation schedule lists all the properties/assets you own on the rental property. It also mentions how much you can annually claim in depreciation tax deduction on rental property. The capital works schedule consists of the building and construction costs of the rental property. It is important to maintain all the bills while you were building the property. In case the bills are amiss, one can ask an architect or builder to assess the costs involved in the construction of the property.

Tax Deductions You Can’t Claim

There are also certain costs that you can’t claim for tax deductions:

  • Any cost incurred while you used the rental property for your personal use
  • All the utility bills paid by the tenants, like electricity, etc.
  • The inherent costs associated with buying and selling of properties are already included within taxes and thus cannot be claimed for tax deductions
  • Sometimes, owners borrow money against the property, like selling its equity or mortgaging it. The costs involved in such loans cannot be tax deducted.

Note: While we mentioned that inherent fees involved in buying/selling of properties are not eligible for tax deductions, many other charges during the buying/selling can be eligible for the same. Thus, it is advisable to maintain all bills of the process.

Final Words:

Rental properties are a great investment opportunity. By claiming the tax deductions in the right way, you can increase your profits from your property even further.

What You Need to Know About Short Term Leasing Your Investment Property

Short-term leasing has taken the property industry by storm in Australia. The industry witnessed a whopping growth of 47 percent. According to reports, 30,000 homes have been leased in the year 2018 alone on a short-term basis. As the short term rental market is becoming competitive, house owners can still capitalize on it. There are many benefits of leasing out a property on a short term basis. Everybody aims to generate some yield on investment property. If you plan to rent your property in such a way, you must remain ahead by focusing on quality. This will help you beat the competition prevailing in this segment.

Given below are some of the things that you must know about leasing your property for short term:

Boosts Rental Yields:

Renting your property on a short term basis can enhance your rental yields. If you want to boost your rental yields, the property must meet the requirement of location. All the locations cannot be the same. There are experts who will provide you with useful advice about your property and its location. Properties located at a famous location must be high in demand. Such properties can generate a handsome profit. So if you are planning to invest in a property, check its location on a priority basis and then make the investment. You must also find out the entire tax depreciation cost.

Depreciation on Short Term Rentals:

Short term rentals can lead to high deductions as you also provide the furniture. The original structure of the property will be eligible for division 43 deductions only if it was constructed after September 1987. The plant and equipment items in the property will be of great significance and not just the main assets like furniture it will also include other items in the property like blinds, AC, carpets, etc. However, furniture items do give you a strong edge as these items receive high rates of depreciation. Things have undergone a change in May 2017. If you purchased an investment property after May 2017, you will be eligible to claim for plant and equipment deductions. For this, you must purchase the property as brand new. You can seek the plant and equipment deductions for the furniture if you purchased the established property after the year 2017, May. You must generate the property depreciation reports in an effective manner.

Ways to Claim Plant and Equipment Deductions on Furniture if You Bought After May 2017?

All you have to do is just purchase the pieces of furniture in brand new condition and, get them installed at your income-generating property. As long as you fulfil this condition, you can claim plant and equipment deductions on the furniture.

Conclusion:

It is time to tap the vast potential of the short term rental market. Do not deprive yourself from the immense benefits that you may receive from leasing your property on a short term basis. And, when you install new furniture in the property, you can avail some very worthwhile deductions by renting it out. Calculate the property tax depreciation and start the planning of renting your investment property.