It is hard to believe, however according to tax experts, over half of all property investors are missing out on thousands of dollars in unclaimed tax deductions every year. Could you be one of them?
Unclaimed deductions are a windfall for the Australian Tax Office. At Sunshine Coast Property Management we often meet new investors whom do not realise they have been missing out on tax refunds that are rightfully theirs. This is especially common among investors who rent out their previous owner occupied dwelling, or who rent out their home while they are travelling or renovating.
Property investors need to understand the basics of depreciation so they will be better able to discuss how to maximise their deductions with their accountant. Increased tax deductions should lead to higher tax returns, allowing investors to pay off their mortgage faster, improving their property to increase rental returns or even assisting in financing the purchase of another property.
What is depreciation?
As a building ages, items within the building are affected by general wear and tear and as a result they depreciate in value. Owning an investment property is similar to running a business. Rental income is taxable just like profits made within a business. Items such as carpets, blinds and applainces within a rental property depreciate the same way as tools of trade would withinin a business. The Australian tax system allows for the loss of value of these items with a tax deduction for depreciation relating to the building and the items it contains.
Depreciation can be claimed on an income producing property whether it is new, old or previously an owner occupied dwelling. The deduction for depreciation means the investors taxable income is lowered and less tax will be paid.
Before an investor can claim a tax deduction for depreciation of fixtures and fittings, and capital items such as the building structures or improvements, they must provide the tax office with an approved depreciation report. Most quantity surveyors can provide this report for between $550–$750.
As with any financial decision, we recommend you speak to your tax advisor or accountant about this strategy. You may be surprised with the result a depreciation schedule could make to your next tax return.
The team at Sunshine Coast Property Management focus on maximising returns for our investors. This requires an accurate and detailed depreciation schedule.
We can help guide you in the right direction on this and provide you with a range of other strategies for maximising your returns.