Property investing and tax deductions

Before your eyes glaze over thinking about the taxation system.

This is actually where it gets interesting if you are a landlord.

If you are considering property as an investment - you may be eligible for tax return deductions on the depreciation of your asset. That’s money back in your pocket!

To make the most of your first investment home, it’s important to know exactly what property depreciation is, how it affects your investment and what kind of things you can claim on.

What is depreciation?

Put simply, as your property gets older, its structure and the assets contained within it wear out. Luckily, there is a way to recoup some of the losses investors face from depreciation.

BMT Tax Depreciation CEO Bradley Beer said for those that have income producing properties (investments) they are entitled to several taxation benefits but often do not take full advantage of them.

“While most investors are aware of claims for expenses such as interest on their loans, council rates, property management fees and repairs and maintenance costs, depreciation is a hidden factor often not considered,” Mr Beer said.

So what can you claim and how does it work? Mr Beer said that depreciation deductions are split into two distinct categories: capital works allowance and plant and equipment depreciation.

Capital works allowance

This form of depreciation deduction can be used for issues like wear and tear that occurs to the structure of the property or any fixed items. This includes things like roof or wall damage, broken doors, kitchen cupboards, bathroom tubs and toilet bowls.

Find out more here.

Plant and equipment depreciation

This type of depreciation deduction can be claimed for easily removable fixtures and fittings around the property. The Australian Taxation Office recognises more than 6000 depreciable assets in this category such as carpets, blinds, air conditioners, hot water systems, smoke alarms and ceiling fans.

Find out more here.

If you’re unsure how this will help you make the most of your investment Mr Beer said that claiming depreciation deductions can make a big difference to your cash flow.

“To give you an example of how much you could get back at tax time from depreciation deductions, during the 2018-2019 financial year we found residential clients on average claim almost $9000 in the first year of ownership,” he said.

Ray White Concierge CEO Kelly Tatlow recommends using a quantity surveyor, like BMT, to ensure you get back exactly what you’re entitled to when it comes to investment property depreciation.

“BMT have been helping our investors to maximise their cash flow from their property for more than 10 years,” Ms Tatlow said.

“We know that our Ray White Concierge customers are receiving expert advice from industry leading professionals and trust they are well informed about the process of arranging a depreciation schedule.”