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Can My Accountant Do The Tax Depreciation Report For My Rental?

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Accountants are not just tax savers but you can also call them real saviors who can churn out your taxes in the right way to save your hard-earned money. But while calculating your property depreciation costs you might wonder “Can my accountant do the tax depreciation report for my rental?” Well, this can be taken as one of the contentious issues as accountants are not qualified enough to prepare tax depreciation reports.

A tax depreciation report necessitates a greater degree of consideration than the calculation of the costs involved in materials and construction labor. Accountants are not qualified enough to carry out the construction estimate costs on their own. Additionally, if accountants claim to do the property depreciation schedule, they end up in confusion which may amount to massive financial losses. Read on to find out the reasons why an accountant is unable to carry out property valuation.

Reasons why an accountant is unable to prepare tax depreciation report:

  • Accountants are not equipped to determine building expenses, which covers more than only materials & building labor.
  • Auditors are not equipped to evaluate building works & associated expenses of past works covering the life of the rental or property.
  • Depreciation demanded by auditors without the application of a professionally qualified tax depreciation schedule is considerably more traditional & result in thousands of dollars in wasted reductions for the investor.
  • Quantity surveyors require to prepare a report in advance in order to allow auditors to carry out the tax depreciation report with the help of an investment property calculator. As accountants have no idea about quantity surveying they cannot effectively do the report if there is no quantity surveyor. Thus, it can be said that it is the quantity surveyors who are qualified enough to do the tax depreciation report. Without the help of a quantity estimator, it is almost impossible for an accountant to carry out the tax report for your rental property.
  • Construction costing and building skills are extremely essential for preparing a tax depreciation report. Without the proper knowledge of construction, one cannot manage to prepare a property depreciation report.

Thus, all your confusion ends here as now you know why an accountant is unable to prepare a tax depreciation report. In order to carry out a tax report, the knowledge of construction and building planning is an essential factor. One cannot be an accountant and a civil engineer at the same time as everyone has their own cup of tea to drink.

Conclusion:

In order to carry out tax reports for your rental property, you need to hire a property valuer with a sound knowledge of construction and quantity surveying. Quantity surveyors and valuers are well-equipped to carry out and determine tax reports for a rental property which an accountant is unable to do. Therefore, you should consider hiring a valuer and a quantity estimator to carry out your tax depreciation reports for your rental property.

Repairs, Maintenance Vs Capital Improvements

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Before delving too heavily into this, first, you need to understand the basic meaning of repairs and improvements. So, what can be considered as a repair and what can be considered as an improvement? Improvements can add value to your property, making it more beneficial and fruitful for you in the long run. Basically, it will increase your profit at the end of the year. While repairs are needed to maintain the health of any asset or property, it will keep the asset in good and working condition for a short span of time. We would recommend discussing tax depreciation schedules with a professional and qualified accountant for this purpose.

Understanding Improvements:

The improvements may include:

  • adding assets or anything that adds value to your present property
  • upgrading to a new technology
  • adapting something to a new trend or technique
  • restoration of some aspect of a property

There can be some examples of improvements like installing a security system, an air conditioner, a heater, renovating your kitchen, replacing tiles, replacing the entire roof and much more. Improvements always add to the profit, therefore, you cannot deduct the cost of improvements in the current year. You have to keep track of the expenses and plan a tax depreciation schedule so that at the time of selling your property, you can get tax benefits from it.

For example, if your property’s current value is $200,000 and 20 years later you want to sell it for $400,000, but you have made improvements costing $50,000 then you need not pay tax on $200,000, rather you will pay tax on the amount $150,000.

Understanding Repairs:

Repairs are done in order to keep things moving and keep them in a healthy state. They are not meant to add value to your property, but they will bring the asset back to its original condition. They can only add short-term value to your assets. There is tax depreciation on repairs and maintenance that you do on your assets. Depreciation basically involves all the costs and expenses incurred to keep a property in a well-managed condition. Every expense can be related as a property depreciation tax deduction.

Some examples of repairs include:

  • repairing window glass
  • cleaning air ducts and vents
  • replacing electrodes in water heaters
  • replacing sewer pipes

Repairs can be deducted in the current year as they only aid in keeping your asset in operating condition, not causing longevity or prolong the useful life of the property. An example of a repair would be changing the oil in your bike. This will keep your bike in good condition, however not necessarily increase its life.

You are expected to perform repairs more than twice in a period of 10 years to maintain a working condition of your asset. These tax deductions are possible only when you are not using the property as your personal residence. You can file repair expenses only when you are using the property in your business or you are renting it. You can get more information and depreciation reports for your investments on Deppro.

Everything You Need to Know about Holiday Rentals Depreciation

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Holiday rentals depreciation is not claimed as often as we’d like it to be. Investors often miss this deduction and it is surprising how strongly the statistics depict the lack thereof. This could be due to numerous reasons despite the considerable benefits of tax depreciation deductions.

In actuality, those who own holiday rentals have the ability or entitlement to make a claim against depreciation. So, they can easily be claiming depreciation on property as well as furniture which is in the ambit of the rent period.

The whopping statistics show that people owing holiday rentals can accrue a great deal of profit or savings by this. All they need to do is have a tax depreciation plan and they can save a considerable amount.

What Can You Do?
As a smart rental property owner, you can draw up your tax schedule of depreciation to be entitled for the claims. Or you can even have an estimate drawn at how much claim you’ll receive so that you have a better idea.

Being at the top of your game with your taxes can help you be an optimal business owner.

Wrapping-Up:

Being the owner of your investment property already helps you in availing the best of your business. However, being smarter and more aware along the way is the game changer. So the most optimal way to ensure maximization of profits is preparing your depreciation schedule.

All you need to do is reach out to Deppro and we’ll take care of everything. From preparing to reviewing your depreciation schedule for tax, we’ll do it all. We will even give you a review of your entitled amount of deductions.

Depreciate Your Property Taxes with Tax Depreciation Services

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The value of your property does go down every year. While that is something you might not be particularly chuffed about, you can rejoice in the fact that claiming depreciation on property is the perfect opportunity to recover your losses. This can be done is by setting off those depreciated amounts from the property tax you are supposed to pay.

How to Assess Property Depreciation?

The tax benefits we spoke about at the start would be granted as per the numbers provided by a formal property tax depreciation schedule. This is done by employing the services of a qualified and certified quantity surveyor. The surveyor would visit your property in person and take all necessary measurements of the assets on your property.

Using Property Depreciation for Claiming Depreciation on Property

The quantity surveyor’s report would be part of the overall property depreciation reports. These reports would help in preparing the tax return in such a way that would allow for claiming depreciation on your property. Every asset on the property is usually of two types – it is either a capital works or plant and equipment. Depending on the type, there are different depreciation rates laid down by the ATO.

Conclusion

Do not let your property tax be a burden on you. The depreciation of different elements of your property can easily be used to set off those losses against tax deductions that could reduce your total tax outlay. The property tax could be substantially reduced by claiming depreciation on property. A good agency with certified quantity surveyors like Deppro can help prepare the depreciation report and then use it to prepare the correct tax return which will include the maximum entitlements.

How Real Estate Investors Can Benefit From a Property Depreciation Schedule

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Real estate is a great investment avenue. But property investors have to deal with depreciation. Every year the value of their property reduces. This is called depreciation. The rate of depreciation that each component of your property is eligible for is different. It depends on the ATO (Australian Tax Office) regulations. The Australian tax depreciation rules clearly specify the different rates. Accordingly, the tax deductions can be calculated and claimed. But for that, a complete schedule of depreciation calculations for every year needs to be created. That is called a depreciation schedule.

Process for Creating Depreciation Schedule

The first step of the process, is to get in touch with a dependable agency. This will help you save both time and effort. They will send you a qualified quantity surveyor of which will list down every single asset on your property. Then those assets are categorized as per the ATO rules. The depreciation schedule is then created with such details. A reputable agency will make the process of claiming depreciation on investment property very easy and convenient.

The Tax Benefits

Once the depreciation schedule is ready, it provides the corresponding tax breaks that are permitted by law. If the schedule has been correctly made, then the tax return will also be accurate. Therefore, there is no chance of double tax getting paid for the same item. Not to mention, you would not miss out on any taxable items. But most importantly, no eligible tax deduction option would get left out. Therefore, you can be assured that the lowest possible tax is paid.

A properly-made depreciation schedule is very important for investors. Otherwise, they can end up losing a part of their profits needlessly. Investors should have an accurate view of the tax savings they are eligible for, and such a schedule can help them.

10 Things We All Love – And Hate – About Investing in Property

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Investing in property isn’t necessarily a hobby, though some see it way. Regardless of whether a person is in the sector to earn a little extra money or making a career out of it, there are things to love – and hate – about owning a portfolio.

 

 

  • Reliable income

Your homes and commercial blocks will always be there unless something extreme happens. Investing in property is often seen as a long-term, reliable investment, particularly when you have tenants.

 

  • Good homes

Property investors have their ears to the ground, and emails in their inboxes, about the latest commercial and residential pickings up for sale. Quality within the building itself is a must; the structure being up to code, curb appeal and a recent update to the capital works are signs of a good investment.

The home itself is one part; the neighbourhood is the other. Tenants, whether they’re a family wanting to put down roots or a business looking to set up shop, will look at the neighbourhood dynamic before deciding to sign anything. Access to public transport, shops, and air conditioning are only a few of the items on their checklist.

 

  • Turns negative to positive

You won’t make money straight away, but delayed gratification is a given when you’re investing in property. Negative gearing is when you’re spending more money on your portfolio than there are returns.

When you keep working on it though, the negative gearing will turn into positive cash flow. This happens in a number of ways; lowering interest rates, raising the rent, changing property managers and reducing certain expenses.

 

  • Rentvesting

Rentvesting = flexibility. You want to live in your dream suburb however, housing prices are on the expensive side. But you can still rent. You have flexibility instead of another mortgage but the luxury of living in a nice suburb.

 

  • Passion project

People don’t want to make a career out of investing in property but they genuinely love the market and browsing homes. Instead of investing some people will buy homes, renovate them and sell for a profit.

No difference between work and play

 

  • Competition

Now, where there’s a good property, there’s going to be five investors wanting it. Bidding wars happen and people miss out. This is why it’s better to be a strategist, not a romantic who buys with their heart.

 

  • Tenants

Property investors aren’t afraid to share stories about the horror tenants they’ve had over the years. Wild parties, drugs and extreme disrespect of the property e.g. cleanliness are some of the tamer complaints.

Problem tenants are easily weeded out by an experienced property manager. It saves the investors time and heartache (don’t be friends with your tenants).

 

  • Shoddy management

That being said, however, for every good property manager there’s plenty of bad ones. What does a sketchy property manager look like? Well, they advertise their services in an unpaid ad on Gumtree for one. They also don’t keep a regular inspection schedule or return your calls for days. Good management firms are often recommended by other investors. They will keep you updated and return your calls as soon as they can. Plus, all levels of staff in the office look happy to be at their job.

 

  • Capital gains tax

Ah yes, you can’t make a profit without conditions attached. If you sell your property for a profit, then you must pay CGT. It’s unavoidable, but certain conditions and discounts are available to lessen the sting.

 

  • Not quite liquid

Investing in property isn’t easy money. You won’t sell it for a quick profit. Good homes can spend days to months on the market. So dress it up nicely and make it a place where people want to live.

No such thing as easy money in the property market

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Read this to increase the value of your commercial investment property

The amazing tax benefits from rental properties you probably forgot about

Residential properties that guarantee an ROI

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Being selective about what you invest in, whether it’s commercial or residential properties, is a blessing. You invest wisely and earn enough to make your next purchase. When you’re shopping around, you already know the type of tenant you want to target.

 

Student accommodation

University and international students either live on-campus or in suburban properties close to their school. Residential properties like this need to be monitored closely so that nobody skips rent or causes damage. But in spite of the horror stories, the tenants are normally very well behaved.

You can rent out your properties as student accomodation

Student accommodation can take many forms. It can be a block of units, a single family home or even a townhouse. The home is ideal if it’s close to any given university or college campus and public transport.

 

Retirement living

These residential properties are often built by specialists and handled by a company with specialist experience (Aveo is an example). But on Real Estate, there’s some properties marketed as ‘retirement living’, geared towards investors.

Retirement homes are marketed to those who are over sixty but are by no means invalid. Residential properties on the market have high-end amenities and appliances included in the apartment or home. ‘Old’ doesn’t equal ‘dated’.

Mansion on the outside, retirement living inside

Retirees are good tenants because they respect their home and maintain it to the best of their ability. If they can’t, they’ll have a nurse or family member help them. If you’re looking at residential properties for retirees, it’s worth looking into these medical/nursing services and market them as optional amenities.

 

Single family homes

Small families will rent before they can afford their first home. Single family dwellings that are close to schools and shops are absolutely worth the investment and the fight that comes with trying to purchase one. Competition is fierce because other investors know there’s money to be made in this area of the market.

 

Need more advice? We have these for you…

  1. The great debate | Buy old property or build new?
  2. 6 signs of an amazing property manager

The great debate: 5 articles about smashed avo vs property investment

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On May 16th 2017, property guru Tim Gurner appeared on 60 Minutes to talk about the property market and he didn’t hold back. What he didn’t expect, though, was to set off a chain reaction of jokes, puns, and a genuine debate about breakfast.

His comments that young people can’t afford to get into the market thanks to meals out and their daily coffee hit received a lot of backlash, but also changed the way we looked at Australian property investment. We collected some of the best articles about the issue from around the web so you can make your own judgement.

 

 

 

‘There was no discussions around, could I go out for breakfast, could I go out for dinner. I just worked.’  – Tim Gurner

A quote from the original interview that sparked an uproar. Tim Gurner, property investment advisor and developer speaks candidly about his struggles when he entered the property market…and why the new generation has no chance of getting their foot in the door.

 

 

 

Travel, smashed avo, or that avocado farm in rural WA? Mark Campbell, writer for the Sydney Morning Herald, looks at the ‘lazy’ millennial generation and their prospects for entering the property market. Are they really in trouble when they’re spending money on trips to South America and $15 smashed avo with a sprinkling of dukkah?

 

 

 

The debate made its way over to the USA, where a savvy Twitter user did some maths and shared the results.

 

 

How many serves of avo smash a day equals the profit your investment property brings you in capital? This tongue-in-cheek piece from Real Estate has some unexpected figures.

 

 

What if it’s not the breakfasts’, or millennial’s, fault? Nick Evershed from The Guardian helpfully points out that markets and general affordability, or lack thereof, are putting young people out of the running.

This article even comes with a fun ‘luxuries’ calculator that equates the amount of ‘fun stuff’ people can do, eat, and more with the equivalent of a property investment deposit.

 

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4 articles that give investors a reality check about the property market, worldwide

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The property market is competitive, no doubt about that. Internationally and locally, investors are getting priced out of one market and moving onto another, before the same cycle repeats itself. Australia’s had a ‘golden age’ of affordability, but in recent months that rosy period has come to a screeching halt.

 

 

Sydney and Melbourne’s property markets are slowly outpricing potential investors thanks to rapid employment growth, among other reasons. While prices in these cities have risen over 10%, Brisbane’s growth remains in the single figures. But is it too good to last?

 

The UK has one of the priciest property markets in the world, and the younger demographic is certainly feeling the pinch. This is all thanks to changing work conditions, the drama of Brexit, and the ‘silver generation’ using their experience to snap up hot real estate.

 

This is an opinion piece, but the context is relevant. This debate was sparked by investment professional Tim Gurner’s scathing observation about millennials and their lack of potential to crack the property market. Why? Because they love $4 coffee and avo smash everyday. Even though the debate has raged back and forth, it’s put the way we work, save, and spend in the spotlight and there’s no sign of it slowing down.

 

There’s a glut of apartments in Brisbane, and developers are so desperate to sell them they’re offering incentives to buyers. This comes as a result of  oversupply and minimal demand. ‘Offers’ include the likes of free rent (for a period), vehicles and free avo toast everyday for a year. That’s probably another house deposit…or a new couch.

 

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Don’t make these 6 mistakes if you want the best property investment possible

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There’s no one-size-fits-all when it comes to finding the ‘best’ property investment available. Ideally though, you want it to make you money through rent paid by tenants. It doesn’t matter if the property is residential or commercial, a house or an apartment. To make sure you find the best property investment for YOU and your portfolio, we compiled these five tips.

 

  • You don’t have professional help

You need unbiased professionals to help you handle the financial aspects of property investment. Mortgage brokers help investors daily, giving them advice about home loans and ownership structures. You’ll also need your accountant on your side. Find one that specialises in property accounting so they can lay out a plan and a budget based on your income and credit.

 

  • You don’t have an end game

Nobody invests in property just for the heck of it. There’s always a plan in place for each property in the portfolio. There should be a backup plan, too.

Some get into property investment to boost their retirement savings or retire early. Others want to get out of their day job after earning income through buying, renovating, and selling homes. Don’t walk into the property investment game with short-term goals.

 

  • Your properties are all in one place

Yes, you’re more comfortable buying ‘close to home’ because it’s familiar territory. But this means other investors are buying you out of the locations that really make the big bucks.

Less than 20% of investors have two properties or more in their portfolio. Less than 1% own six. This means 99% of investors are playing it safe and are missing out as a result. There’s no reason why you can’t have a property in Tasmania or another in Perth. Get out of town when it comes to looking for the best property investment.

 

  • You haven’t looked at trends

Get familiar with complicated terms like ‘yield’, ‘median price’, and ‘cash flow’. Trends like these will guide you in making great purchases.

 

  • …or done your homework

Have you done any research into the area you want to buy? Did you check if there’s any upcoming developments like shopping centres? What about schools and access to public transport?

If you don’t do your homework, you’ll end up with a property investment located in an area saturated with others. You’ll leak money instead of save. This is why it’s important to look at trends and branch out from your ‘home base’.

 

  • You can ‘manage on your own’

If you can, good on you. But the task of picking tenants as well as monitoring them, setting rents, and the like takes time you don’t have. Plus, you’ll get emotionally invested. Hiring a property management team is a better option.