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How Much Will Your Depreciation Schedule Cost?

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Every asset you own goes down in value over a period of time. In real terms, this is because of wear and tear due to regular usage. In accounting and financial terms, this reduction in value every year is expressed as a percentage. The concept is broadly similar across the world. But the rules, implementation, and even percentages might vary a bit according to the country and asset category. For this post, let us consider the impact of depreciation on an investment property in Australia. Let us also consider what could be the likely costs involved in calculating Australian tax depreciation on the property.

Tax Implications of Property Depreciation in Australia

The ATO (Australian Taxation Office) has laid down very clear rules regarding depreciation of the value of an investment property. The annual reduction in the value of fixed as well as removable assets of a property would need to be listed in a depreciation schedule. According to this schedule, a property owner can claim deductions on the tax payable by him or her. That is why it is very important to get the schedule prepared by a qualified and experienced professional. Most good consulting companies have experienced quantity surveyors on their rolls. They take accurate measurements and make the schedule exactly as per the recommendations of the ATO. This ensures that a property owned is not taxed more or less than he should be.

Cost Implications of Preparing a Depreciation Schedule

Like everything else in life, there are several ways of going about this. One can even choose to make the schedule on one’s own. This way the depreciation for property would be calculated at zero cost. But this would run the risk of a major error. The error could turn out to be costly in the future. The second option is to employ a company which promises to charge less. You could get the job done cheaply, but there would be a catch. There would be several important aspects not covered under the charges. These would either reduce your tax savings later or cost you more in additional charges. Either way, you end up paying more than you save. So what is the best option?

How Much Will a Good Depreciation Schedule Cost?

The best way of deciding or understanding this is to first list down everything which you necessarily need. For example, do you need an exclusive report for your property? Or would you be okay with pooling the cost with other owners of the contiguous property? Should your report contain inputs from other relevant parties? Would the formal inspection report be part of your tax submission? Based on these points, it could cost as low as $175 plus GST. And it might go up to $1000 plus GST for a comprehensive report.

Conclusion:

A good Deppro depreciation report might cost you more than other cheaper alternatives, but it will help you save more in the long run. You will not only pay less tax, but you will also be protected from needless taxation that is deductible legally.

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

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It is said that death and taxes are inevitable. One never knows when, where, or how death can strike. But you do know that taxes come back to haunt you at least once every year. One thing that you mustn’t do is evade taxes. But what if you could reduce the tax liability without breaking any rules. The Australian Tax Office (ATO) has detailed rules about tax deductions. While most big-ticket options for tax reduction are well documented, there are many useful rules which not everyone knows about.

Let us look at two such tax refund options which you might not have heard about – one on work-related expenses, and the other on the depreciation of your property.

1. Work-Related Tax Deductions:

Let us first look at the ways your work-related expenses could help you lower your tax. In case you have taken up a course of study which pertains to your current employment, all expenses on it beyond the first $250 can be claimed as deductions. In case you can show that you are doing your office work from home, then the expenses incurred for that can be claimed. Some common examples are stationery, printers, computers, electricity expenses, and even chairs and desks. For some specific jobs, footwear expenses which are specific to their job can also be claimed. If you have subscribed to any magazines or journals related to your line of work, even that can be claimed under tax deductions.

Some of the items on the list above must have surprised you, but we are not done yet. You can claim a total deduction of up to $300 without submitting any proofs, but beyond that, you need to submit evidence. So let us look at some other work-related expenses where you can show receipts and reduce your tax. What about the work clothes you wear? Well, you can claim up to $1 per washing and ironing, provided you can show receipts. If you are paying your mobile phone and internet connectivity bills and have receipts to show, you can add them on if you are using them exclusively for work. The maintenance expenses of the vehicle you use to travel to and from work can also be claimed. The maximum distance allowable is 5000 kms, which means an average travel of 25 kms per day is admissible if you go to the office around 200 days in a year.

2. Property Related Allowances:

When you use a reputable agency like Deppro, they will tell you the small and of course the big expenses you can claim. In terms of assets, the bricks and mortars used in your property can also help you reduce your tax liability. You must remember that the land on which your house is constructed is not considered to be a depreciable asset, so you can’t claim tax depreciation on its value.

The ATO has recently changed its rules regarding claiming of tax depreciation. You need to hire a trustworthy agency who can send a qualified quantity surveyor to your property. The surveyor can make a list of all the assets and accordingly create a property asset list, based on which you can file your tax depreciation returns.

What everybody ought to know about tax depreciation

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There’s experts out there, like Deppro, who efficiently handle tax depreciation so their clients can get the best possible return. Seasoned property investors know about tax depreciation and how to claim deductions every year. This article is for the first-time investors wanting to get in the market, but not quite able to wrap their head around depreciation.

 

  • It’s a claimable expense

Tax depreciation is deductible from your income, giving you a greater tax return.

 

  • You need a depreciation schedule

This is absolutely necessary so investors and business owners can claim the maximum amount over time. Depreciation schedules begin from the settlement date and estimate the value of taxable items over their useful lifetime.

Getting a depreciation schedule takes the guesswork out of evaluating items in your property as the years pass. Quantity assessors, like those who work for Deppro, will do an inspection. The depreciation company uses these to write a report and a depreciation schedule. These are delivered to the client within the month. This often overlooked information helps investors significantly boost their returns.

 

  • You can buy more properties

The money earned back from tax depreciation lessens the debt investors take on when they buy property. It’s common for them to use the extra funds to expand their portfolio. Once they do, they repeat the process of getting a depreciation assessment.

 

  • The report isn’t an annual thing

The quantity surveyor will only need to visit the property once. They’ll take pictures and make notes before heading back to the office and drawing up the report, outlining the values of the items they see. If you do renovations on the home, though, you will need to update this report for an accurate schedule. You’ll get in trouble with the ATO if you make a claim with false information.

 

  • ATO approval

The depreciation schedule must come from a registered tax agent so that it complies with guidelines from the ATO.  Deppro’s quantity surveyors are educated, accredited, and take pride in providing accurate reports.