Depreciation has emerged as a complicated topic with some particular rules, depreciation rates, and different claiming methods among others. Investors may find claiming depreciation on property a complicated job. Some investors believe that if they perform the job of claiming depreciation on their own they will be able to save some money. Instead, they must seek the services of depreciation experts to prepare their tax depreciation schedule.
Given below are the three most common depreciation mistakes committed by property investors and how a quantity surveyor can become their savior here:
1. Overlooking claimable items:
It has emerged as one of the biggest mistakes often committed by investors. Property investors fail to obtain expert advice and miss several depreciable items every year. ATO has listed a whopping 6000 depreciable plant and equipment assets and therefore investors may overlook many common household items that carry some deductible value.
If you want to ensure that these household depreciable items do not get missed, it is ideal to seek the services of expert tax depreciation quantity surveyors. The Quantity Surveyor will then create a depreciation schedule. The schedule will include every claimable object available in the building structure and its fixtures and fittings. The depreciation schedule will cover the capital works allowance deduction that may include floors, ceilings, walls, etc. It will also contain the plant and equipment depreciation for the conveniently depreciable items like hot water systems and blinds.
2. Property is way too old:
Nearly all property investors who bought their property second-hand or after 2017 may think that it is not eligible for depreciation deduction. This is as a result of the law that has made a few second-hand properties ineligible for depreciation deductions. These property investors must cross-check such information prior to believing it and must not rule out depreciation with such ease.
It is worth noting that there are still tens of thousands in depreciation deduction on used properties. Also, second-hand property owners are still allowed to claim every eligible capital works deductions. After calculating these depreciation deductions on second-hand properties, they should prepare a detailed tax depreciation report.
3. Do it yourself schedules:
DIY schedules may be saving some money for the investors but it may also cost them thousands in the longer run. They may miss precious deductions and may end up making huge errors. If they go on to claim the objects incorrectly they may face severe outcomes. For instance, regular lightings like light shades fall in the category of plant and equipment assets. And, it has an effective lifespan of five years along with a diminishing value rate of 40%. Property investors may believe that all lightings will come under this category but it is not the case always. Downlights will come under capital works and carries an effective life of 40 years with a depreciation rate of 2.5%.
Investors should be highly vigilant when it comes to claiming depreciation deductions. They should hire an expert Quantity Surveyor to calculate depreciation on rental property. As the tax depreciation schedule will remain for the lifetime of the property, it becomes imperative to keep it right from the beginning. There are several co-owners who may calculate depreciation first and then take the decision of splitting deduction on the basis of ownership percentage. So you must seek professional services to avoid such mistakes.