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Can Depreciation on My Rental Property Be Back-Claimed?

Several property investors are not fully aware of the tax benefits they can claim from their rental property. As per ATO rules, a certified quantity surveyor can help such investors reduce their tax burden. This is on account of the depreciation on their property every year. A quantity surveyor can help them make a detailed tax depreciation schedule for rental property. This would then help reduce their taxable income. As a result, the annual tax also gets reduced. Were you aware of this? If so, then you must be claiming the due depreciation tax benefit every year. But things not stopped here. Let’s say you missed claiming the depreciation on your rental property in some previous year. You might have given up that tax deduction as lost forever. But that is not correct. You can also back-claim your depreciation benefits on rental property. Read all about it here.

How Many Years Are Back-Claims Permitted?

This would have been the first question in your mind by now. The ATO has different sets of rules for different categories of taxpayers. If you are an individual taxpayer or the owner of a small business, then you can back-claim missed returns of the last two years. For other categories of taxpayers, this period is four years. For all these periods, the date of calculation is important. ATO guidelines state that the date of notice for tax assessment is the date from when the period is considered. In case you haven’t got any notice, then the date you filed your incomplete return is considered. Also, for the same period, you can submit more than one request for amendment.

The Process for Back-Claim of Previous Years

The process begins with a simple request for amendment made to the ATO, which is free of cost. After that, you need to wait for the ATO to send you the notice for submitting the amended return. While you wait, you should get your amended rental property depreciation report readied. The ATO website does provide all details for you to do it. But you should get this done by a certified quantity surveyor or at least consult your tax accountant. That way the chances of errors are minimised.

A Review of the Entire Process

Now that you know that a couple of years of delay can be corrected, you need to understand the complete picture. ATO rules allow you to claim tax relief on account of depreciation. Depreciation is the annual reduction that your rental property suffers. This is a normal accounting principle. You can claim depreciation for both fixed assets and other fixtures and fittings.

Conclusion:

You may have submitted incomplete rental home returns in previous years. It could be simply because you didn’t know about it or you might have missed it. All it means is that you paid a slightly higher tax that year. But that mistake can be easily corrected. You can back-claim for two to four years, depending on what type of taxpayer you are. Get in touch to learn more and speak to one of our professional team members for more insight.

10 Commonly Overlooked ATO Tax Deductions

Taxes are especially painful to small and medium sized enterprise owners. Neither do they have the scale of a large company nor the agility of a startup. But the tax rules are equally applicable to such business owners. This is the reason such business owners often fret about their tax burden. If you are one such person, you should be happy to know that we have good news for you. There are several legal tax deductions that are allowed by the Australian Tax Office.

List of the Commonly Overlooked ATO Tax Deductions

Here is a quick list of Australian tax depreciation and other allowed deductions:

  1. Any new or second hand assets purchased for your business can help reduce your taxable amount by as much as $20,000 AUD. This is different from the fixed assets listed on your property depreciation tax deduction.
  2. Any Union fees paid can be reduced from taxable income under the D5 clause.
  3. All donations of $2 AUD or higher are actually eligible for exemptions. The conditions are that these contributions are made to charitable organisations.
  4. If you operate your business from home, it can provide some relief as well. Remember that this is different from the tax relief your home can provide in your tax depreciation schedule. Here we are talking of the occupancy cost that you incur for running your business from your home. Your expenses on printers, computers, and even licensed software could be claimed under this head. The only condition is that they have been used solely for your business.
  5. In case you are paying any insurance premium, there might be good news for you. This depends on the kind of insurance taken. It should be a policy to prevent loss of business income. Other regular insurance policy premiums cannot be claimed, though.
  6. If you are educating yourself or upgrading your knowledge, the expenses are protected under the ATO rules. This would include expenses like textbooks, professional journals, related travel etc., just to name a few.
  7. This is a good one. If your work is mostly outdoors, and you spend a lot of time in the sun, then there is something for you as well. All expenses on sunglasses and sun shades are considered as expenses made for the protection of your eyes, and can be claimed.
  8. As a business owner, connectivity costs are very vital but sometimes can be quite steep. No business owner can survive without spending money on internet connection at all times, or on mobile phone expenses. The good news is that these too can be claimed.
  9. Say you have employed a tax consulting agency to help you prepare your investment property depreciation schedule ATO. The expenses on fees etc. can also be duly claimed as legitimate business expense.
  10. We’ve left the scary one for last – no business is ever insulated from the bad times. In case your business suffers financial losses in any year, the tax rules also allow you to claim relief on those losses. That’s what they call a silver lining for a dark cloud.

How to Claim Depreciation on Previous Owners’ Renovations

Many investors know that they are eligible to claim depreciation of building works they have carried out to a property. However, some don’t know that they can also claim depreciation of renovations done by former owners of the property. The claimable depreciation will depend on the property purchase date and extent of renovation took place. To claim depreciation, you need to consider a few factors like ATO depreciation rates, 2017 budget, etc. The 2017 budget is important as your claims depend on whether you purchased the property before or after the budget.

What if You Have Purchased a Property Before 2017 Budget?

Things won’t be complicated if you happened to purchase the property before the 2017 crucial budget. In such a scenario, you are eligible to make claims under Division 43 and Division 40 of the Income Tax Assessment Act. Division 43 covers the capital works undertaken by the former owner to the concerned property. It may also include all the renovation works such as a bathroom, kitchen restoration, building extensions, etc. It will also include any work carried out for building structure improvement. In other words, you can claim renovation work on the roof or walls done by the previous owner. You can also consult property depreciation consultants to make the process easier.

What if You Have Purchased a Property After 2017 Budget?

In this scenario, you are likely to face some complications. You will have to check the amount of renovation that took place or whether the previous owner did any renovation. Budget 2017 introduced the term “new residential premises”. You will get more details of the new residential premises in Goods and Services Tax or GST Act.

Importance of GST

You will come across the term “new residential premises” under section 40 to 75 of the GST Act. It means that the premises which have not been sold or rented out as a residential property prior to your purchase won’t cause any problems as the term covers new properties.

The Act further elaborates such premises as those that underwent “substantial renovation”. Such renovations mean removal or replacement of the entire building. And, installation of a new bathroom or kitchen won’t get inclusion under the substantial renovation.

How It Will Impact You?

If your investment property does not come into the category of substantial renovations, you can’t claim Division 40 depreciation. A new tool on its own is not sufficient to form a substantial renovation.

If the building underwent sufficient renovation to fall in the category of “new residential premises”, you can claim for Division 43 and Divison 40 work. In such a situation, a quantity surveyor will check the amount of renovation work done on the building. They will create a timeline of the building and create a house depreciation report. The report will cover the renovation work, cost, and extent of the renovation. You can use the report to check if your building comes in the category of “new residential premises” or not.

Conclusion:

It’s important for you to find out the exact date of your property construction. This will help you find out what earlier renovations you can claim depreciation. You can also seek the help of a quantity surveyor to develop a detailed report of property depreciation tax deduction

How Depreciation Works for a New Investment Property

When you buy or own an investment property, you are responsible for the maintenance and upkeep. But the property also becomes part of your assets, and therefore it gets linked to your tax liability, and therefore you should consider it as part of your investment property calculator.

What is Depreciation?

As per the principles of accounting, any asset loses value with time, and every year its value decreases, this is called depreciation. We see this most commonly when the value of an automobile is calculated by the insurance company every year before calculating the annual premium to be paid for its insurance. The value of the car is reduced every year, and the new premium is calculated as a percentage of this reduced value, not on the basis of its purchase price.

Benefits of Depreciation

The ATO allows property owners to get the benefits of the depreciation that their property suffers. This depreciation on investment property ATO can actually be claimed as a tax deduction while submitting the tax returns. For this, a process has been laid down by ATO, which requires the homeowner to employ the services of qualified professionals.

The Two Types of Calculating Property Depreciation

A building can have two aspects of the calculation of its tax depreciation investment property.

  • The first mode of the calculation of depreciation is on capital works. It includes all the expenses made on the construction of the building. This depreciation can be claimed over a period of forty years. This period has been decided based on the average expected lifespan of a newly constructed investment property.
  • The second mode of property depreciation is based on the value of the assets added to the building. This would include things like upholstery, furniture, electrical, and utility gadgets, etc. The list provided by ATO also lists the expected lifespan of each item. For example, a carpet is expected to last 10 years, while a kitchen stove can be expected to last two years more.

A Brief Process for Claiming Property Depreciation

The tax declaration would need to contain a detailed schedule for you to be able to claim both the types of depreciation listed above. A certified quantity surveyor would be required. This is because actual measurements and enumeration of every small and big component would be needed. Once the list is ready, the calculations can begin.

Based on the age of each component, and the rate laid down by the ATO, the total depreciation amount is calculated. Once the amount is final, then the amount of tax deduction applicable can be calculated.

Conclusion:

Many homeowners are not aware of the depreciation rules. If these rules are properly utilized, a homeowner won’t need to pay more tax than needed. A proper tax depreciation schedule for rental property can also prevent tax deduction being claimed twice for the same component. All that is needed is to utilize the services of a good consultant. The consulting company and its team of quantity surveyors will help you claim the right tax breaks.

Discover the Benefits of Claiming Depreciation for a Commercial Property

A person buys additional properties with the plan to monetize the assets. This is usually done by renting these out. But many people are not aware that their property can provide monetary benefits outside the rental income too. These benefits are in the form of possible deductions in tax. This blog post will discuss the different aspects of depreciation tax benefit.

How Depreciation Affects Tax?

We all know that an asset has more value when purchased than the same asset a few years later. This common knowledge is called depreciation in finance and accounting syntax. Depreciation refers to the diminishing of the value of any asset with each passing year. When it comes to residential properties, this reduction in value is made up to some extent by the Australian tax rules. The ATO guidelines allow property owners to claim a deduction in tax amount on the basis of this reduction. This deduction is calculated as per the extant investment property depreciation rules.

The deduction in tax payable is applicable to the following two types of assets on residential properties:

1. Capital Works Deductions:

This is the deduction applicable to the capital assets of a property. In simpler language, it refers to the immovable part of a building, like walls, floorings, tiles, doors and windows, wiring, etc. The only thing a house owner needs to keep in mind is the cut off date for the enforcement of this legislation. All properties constructed after 20th July in the year 1982 would be eligible for this deduction. Capital works deductions on properties constructed before this date would be eligible only for repairs, renovations, etc.

2. Plant and Equipment Depreciation:

This is the second way under which claiming depreciation on investment property is allowed under ATO guidelines. This is applicable for all the removable parts of a building. In the ATO guidelines, a complete list of around 1500 such items is provided. Some examples are upholstery, electrical gadgets, air conditioners, etc. A typical building is considered by the ATO to have a useful life of 40 years. But the movable assets listed under plant and equipment have much smaller life spans listed under the guidelines.

Why You Need a Professional Help for Claiming Depreciation?

Most people consider basic financial aspects while purchasing an investment property. But if one considers the tax benefits from the depreciation perspective, the picture changes a lot. The problem with these calculations is that a layman might not be able to do them accurately. A professional company would be able to help in the following two ways:

  • Before purchase, they would help with the calculations of the tax implications of depreciation.
  • After purchase, these companies and their teams would help file tax returns accurately, taking depreciation into consideration.

This is why most prospective buyers consult these experts before the purchase decision.

Conclusion:

A home can be a financial boon in more ways than we think. Experienced and dependable consultants like Deppro can help an investor maximise tax savings by creating an accurate depreciation schedule. They could also ensure that multiple deductions are not claimed by mistake.

Should I Buy an Investment Property with a Swimming Pool?

When you are looking to invest money into a property where you do not plan to live but rather rent out, you need to strike that sweet spot where minimal investment and maximum returns meet. Your property investment returns must be greater than the upfront costs and the recurring costs put together.

How Wise is it to have a Pool on your Investment Property?

Let us take an example of a swimming pool in the backyard of your house. Who doesn’t like to imagine a lazy sunny morning spent lounging by the poolside? Is there any greater joy than a swim in crystal clear blue water? A pool adds a lot of value to a house, for the owner as well as the resident. But we need to remember that a pool comes with several costs.

The Cost of a Swimming Pool

The cost of building a pool might be a one-time investment, but the maintenance of a pool is quite costly, and those costs are repetitive. If you have a traditional swimming pool, then cleaning of leaves and other debris would need to be done manually. But for more modern self-cleaning pools, the costs become higher. The property report for a house with a pool would have a large chunk of the expenses earmarked for the pool.

What Australian Tax Depreciation Rules Say?

Having read so far, you might be tempted to think that a pool on your property might not be such a great idea after all. But there is another important factor to consider – the Australian tax depreciation rules. As per these rules, several elements of the cost of building and maintaining a swimming pool can be set off against depreciation, and tax deductions can be claimed on them.

This is how it works. When a house is constructed, the money spent on it could be broadly divided into two categories. The first is capital works, and the other is plant and equipment. Capital works would include the fixed part of a building, like the walls, floor, and wiring etc. Plant and equipment would include removable parts of the property like smoke detectors, upholstery, electrical appliances etc. A complete list of both these types of depreciation expenses needs to be made by a certified agency like Deppro using an investment property calculator. This list is then submitted along with the tax returns and deductions are availed on tax on the basis of the depreciation calculated. Many elements of the cost of a swimming pool construction can also be included in this list and deductions claimed.

Final Thoughts:

On the whole, you need to consider the location of your property, the cost of the pool, and the amount you can claim later as tax. After considering these factors, you can decide wisely whether you should buy an investment property with a pool or not.

What You Need to Know About the Legislation Changes to Rental Property Tax Depreciation Claims

It’s always quite confusing to adapt to new changes. Similar to the altered legislation to the rental home returns which were observed in 2017. It has been tracked that numerous investors and rental property owners have issues regarding the claims available for them.
To everyone’s relief, what is worth appreciation is that the items under the Capital Works such as the swimming pools, toilets, windows, foundations, walls, and ceilings can be claimed for deductions just like before. There are no changes made to that category.
The alteration has been in Division 40 which includes the subparts of Plant and Equipment category including the electronic appliances, carpets, alarms etc. These are the assets which are extra, in other words, which aren’t a part of the built of the property.
Which Properties Got Affected by The Change?
Well, when summarized, it can be said that the deductions for the above-mentioned category that is the Plant and Equipment is not applicable on the condition that the property was made second hand after 7:30 pm on May 9, 2017. All the investors who have invested in the second-hand property before the mentioned time and date can claim returns on depreciation residential rental property as they used to before.
Also, if a new Plant and Equipment asset is bought after the specified date, it is applicable for claims until the asset’s life remains effective. Lastly, another notable fact is that the investors residing in their building before July 1, 2017, do not have to think about the changes made in the legislation as they are exempted from it.
How to Claim the Right Returns Efficiently?
Sometimes technical terms become quite difficult to understand and analyze and hence it is better to seek professional help rather than trying to be the jack of all trades and master of none. Hence, creating a tax depreciation schedule for a rental property can be extremely easy if done by an experienced, professional quantity surveyor. A person with that profession knows exactly what is to be done for your property and will help you extract maximum benefits by giving you a clear-cut view of your costs, expenditures, and returns.
There are a number of companies providing professional help to people in need of a good tax depreciation schedule and hence you can look out for one such service provider.
The main advantage of choosing this way is that they have immense knowledge about the concerned topic and they are aware of such minor details which can fill up your pockets and make you feel rich by just paying a humble fee for the service.
What after June 30, 2017?
For your information, even if it is past June 30, 2017, you are eligible to calculate depreciation on rental property and submit a tax schedule with your tax returns for 2017-2018. Hence, it’s a win-win situation for many of the investors.
Deriving complete information of such legislative changes isn’t a cup of tea and might leave you confused and unsure of your action despite the hard efforts. Thus, a little bit of assistance and help is never harmful.

Are You Missing Out On Tax Depreciation Claims?

So many Australians miss out on property tax deduction claims every year. Tax depreciation on property investment is a legitimate deduction which the government allows you to claim. Due to the of lack of information on investment property depreciation rules, tax savings worth thousands of dollars are missed out.

Claiming for a tax deduction on the value of your property seems difficult but with the help of a professional expert, it can become really easy. Claiming depreciation can make a huge difference in a property investor’s cash flow. Despite all of this, it is most often missed.

That is where DEPPRO comes in.

What can be Done to Not Miss Out on Tax Depreciation Claims?

In Australia, only 30% of property investors claim deductions for the depreciating value of their property. It is nothing but a non-cash expense which you can claim every year on your property depreciation. You do not need to spend any cash to make this claim.

You are claiming on the declining value of your building or asset. Of course, there are certain conditions like any other tax deduction. If you have a residential property which was built before 1985, then you can claim depreciation on Division 40, Depreciating Assets only. But if it was built after 1985, then you can claim under Division 40 as well as Division 43.

The Tax Depreciation Schedule

A Quantity Surveyor is an official who is professionally qualified to produce a legal tax depreciation schedule by the ATO. It includes the following two divisions:

  1. Division 40: Depreciating Assets: This element of property depreciation schedule is all about assets like plant and equipment, lights, fans, carpets, floating floorboards, smoke alarms, air conditioners, refrigerators and so on. Every item which has a diminishing life is included in this. The tax deduction calculation, according to the investment property depreciation schedule ATO, is carried out based on the effective life of the items.
  2. Division 43: Capital Works Allowance: The immovable parts of the structure like the building, walls, roof, swimming pool, built-in furniture, toilets etc. are a part of this division. The investment property depreciation rules state that this capital works allowance is calculated on the basis of the construction cost of the building and not the current purchasing price. So if you are buying a property, you can claim a deduction based on the original construction cost while the building was made.

How Can DEPPRO Help You?

We have been in the industry for more than 12 years now and have a passion for tax saving. Our team has industry-leading skills and can assist in all areas of investment property taxations. We are always updated and are well-versed with all the latest Australian Taxation Office (ATO) rulings, investment property depreciation rules, and interpretations for our clients.

The property depreciation schedule made by us ensures that our clients get maximum tax benefits and at the same time it complies with all the latest ATO regulations. If you have the property of your own and make money owning it, get a qualified surveyor immediately to perform a tax depreciation schedule. We have offices all over Australia. Contact the one nearest to you today!

Top 5 Tax Depreciation Tips You Need to Know

No one loves paying their taxes. That’s why you shouldn’t let go of an opportunity to legally reduce your tax. The guidelines regarding property tax depreciation allow you to do exactly that. If you go through the provisions of ATO property depreciation you will understand exactly how you can reduce your tax burden, but in this article, you can read that in very simple terms of 5 easy steps.

1. Understanding Your Assets

You need to demarcate each and every asset on your rental or investment property into the two broad categories of capital works and plant and equipment.

2. Getting an Expert Opinion

If you are not sure about how the distinction is to be made, you can get a dependable company like deppro to review your property and list down all the assets correctly. This is done by one of their certified, professional quantity surveyors.

3. Preparing Property Tax Depreciation Schedule

Based on the property review done completed by a qualified quantity surveyor, a complete property tax depreciation schedule would be prepared to detail the exact amounts of depreciation each element of your property is subject to. The company whom you have employed would prepare the correct details of each year’s depreciation.

4. Completing Your Tax Return

Once your depreciation schedule is ready, you need to go through the ATO regulations to understand what tax allowance each depreciation amount attracts. Based on that, your tax return will need to be reworked and the additional allowances factored in.

5. Check Your Refunds

If you pay advance tax, then the tax deductions your depreciation will allow you, will be granted to you as a refund. Make sure that this refund is exactly the same as the calculations you had calculated earlier.

 

Tax Depreciation for Investment Properties

Most investors are aware that their property’s value will only decrease over time. But many investors are not aware of the benefits of this depreciation on investment property. Depreciation can help an investor claim tax benefits. The loss due to depreciation would be partly offset by the tax allowances claimed. A typical rental or investment property would have several components. Some would be fixed and part of the property. Some would be attached or constructed additionally. A property depreciation schedule would enable the right tax breaks to be computed. Let us see how an owner can take the help of companies like Deppro Perth to do this.

The Need for an Accurate Schedule

Different depreciation rates apply to different components of a property. As per Australian tax rules, each type of attracts different tax allowances – a property owner might not have complete knowledge of this. It is also time-consuming and tedious. That is why property owners often entrust the job to competent agencies. This ensures that the tax breaks are accurately claimed.

Calculation of Depreciation on Investment Property

A good agency would have competent Deppro quantity surveyors. These surveyors assess every small and big asset included on the property. This is done in strict accordance with ATO guidelines. The rules laid down by ATO often undergo revisions: Deppro quantity surveyors are always completely up to date with such changes. Therefore, you are guaranteed an accurate calculation of your depreciation with Deppro surveyers. Once depreciation is accurately calculated, the right tax deductions can be claimed.

Investors can easily claim the benefits of depreciation on investment property; these benefits accrue through allowable tax deductions. A well-trained and knowledgeable quantity surveyor from a reputable company can help claim the maximum tax benefits. This also ensures that tax benefits allowed by law are not missed.