Investors are missing out on thousands of dollars’ worth of potential tax savings, with 80% failing to claim depreciation on investment properties, according to Raine & Horne and quantity surveying firm BMT Tax Depreciation.
Angus Raine, CEO of Raine & Horne, is urging property investors to be pro-active about determining depreciation on rental properties before 30 June.
“Many investors do not understand how to properly claim depreciation on residential properties”, said Mr Raine.
“Anecdotal evidence from our network of offices and the experience of BMT Tax Depreciation shows around four out of five landlords overlook this entirely legitimate tax deduction, thereby paying far more in tax than necessary.”
As a guide to the potential tax savings, BMT indicates that an investor could claim cumulative depreciation of approximately $50,000 in the first five years on a new two bedroom unit costing $400,000.
According to Mr Raine, investors can claim building depreciation on a surprisingly broad range of rental property items including: built-in kitchen cupboards; clotheslines; door and window fittings; driveways and garages; fences; and retaining walls and sinks, basins, baths and toilet bowls.
“They can also claim depreciation on carpets, vinyl, and linoleum, as well as hot water systems, heaters, solar panels and air conditioning units,” said Mr Raine. “Many also forget that blinds, curtains and light fittings are depreciable items, as are security systems.”
Apartment investors may also be able to claim depreciation on common property such as lifts and even gym equipment.
“Landlords can claim between 10-40% annually – sometimes more, on depreciable items and in many cases 2.5% of the building cost can be claimed each year for 40 years,” said Mr Raine.
Having a formal depreciation schedule drafted by a registered quantity surveyor is the best way for landlords to ensure they comply with complex tax laws.
“This one-off expense can cost around $700 but this can also be claimed on tax,” said Mr Raine.
Generous depreciation claims are not restricted to new properties.
“Up to 60% of a new property’s purchase price is potentially tax-deductible over the life of the property,” said Brad Beer, BMT's Managing Director.
“But for established properties it is also possible to back date any missed depreciation costs by two years. “Seeking professional advice for depreciation on new and old investment properties is crucial. Preparing depreciation reports is a complex process, but a specialist will ensure your claim is maximised every time,” said Mr Beer.
Investors can claim depreciation on a broad range of rental property items including: stoves, exhaust fans. floating timber floors, bathroom accessories, garbage bins, furniture, carpets, vinyl, linoleum, hot water systems, heaters, solar panels and air conditioning units, blinds, curtains and light fittings, security systems.
Source: Raine & Horne Four out of five property investors short-changed on tax 30 May 2013
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