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Bradley Beer, Add value to your service with depreciation
Properties that generate income for the owner are eligible for significant taxation deductions. Of all the tax deductions available to residential property investors and commercial property owners, property depreciation is most often missed because it is a non-cash deduction – the investor does not need to spend money to claim it. A building and its fixtures depreciate whether the owner claims it or not.
“Research shows that 80% of property investors are failing to take advantage of property depreciation and are missing out on thousands of dollars in their pockets” said Bradley Beer, Managing Director of BMT Tax Depreciation.
As a building gets older, items wear out – they depreciate. The Australian Taxation Office (ATO) allows property owners to claim this wear and tear, depreciation, as a deduction.
Claiming depreciation on an investment property can make a big difference to an investor’s cash-flow. For this reason, it is recommended that Property Managers understand the basis of property depreciation so they can use it to add value to their existing service.
Property Managers should encourage their clients who own investment properties to engage a Quantity Surveyor to complete a Tax Depreciation Schedule. This schedule outlines the deductions available on the specific property and is used by the investor's Accountant in preparing a tax return.
The preparation of a Tax Depreciation Schedule should always include a site inspection where the Quantity Surveyor will take detailed photos and notes documenting sufficient evidence to prepare the report. The report will include a value of each and every qualifying plant & equipment item within the property, the cost of construction at the time the building was built and a projection of the deductions claimable by the owner per financial year over 40 year period.
For one investor who had a tax bill from the previous year, the results were significant.
"I just wanted to let you know that our tax bill for last year of $2,600 became a tax cheque of $12,000 just because of the Tax Depreciation Schedule. Thank you,” said Tiana, of Benowa Queensland.
It is often a surprise to property investors who own an old building to find that property depreciation will attract significant depreciation benefits for both new and old properties. Property owners who have not been claiming depreciation are able to go back and amend previous returns to claim missed deductions in previous financial years.
The following example shows how property depreciation will increase the cash return on an investment property.
An investor owns a property purchased for $420,000 with a rental income of $490 per week resulting in a total income of $25,480 per annum. Expenses for the property such as interest, rates and management fees totalled to $32,000. Therefore the total deductable loss was $6,520.
By claiming depreciation, a specialist Quantity Surveyor was able to turn their negative cash-flow position into a positive one, saving them $4,255 for the year.
BMT Tax Depreciation is accredited with the Australian Institute of Quantity Surveyors (AIQS), The Royal Institute of Chartered Surveyors (RICS) and the Auctioneers and Valuers Association (AVAA). BMT Tax Depreciation pride themselves on providing prompt and professional service to their clients, which has been mirrored in their customer feedback.
“BMT Tax Depreciation’s customer service, from the first call to keeping us updated on progress was exceptional. Their report was clear, thorough and produced quickly. I would highly recommend their service to others,” said Christopher and Rebecca of Chapel Hill, Queensland.
BMT Tax Depreciation can provide property owners with a free over the phone assessment of available deductions. BMT guarantee that when you receive a Depreciation Schedule, your deductions will be maximised. If they cannot obtain double their fee worth in deductions for the first full financial year, there will be no charge for their services. To speak with one of their helpful staff call BMT Tax Depreciation on 1300 728 726 today.
Bradley Beer (B. Con. Mgt, AAIQS, MRICS) is the Managing Director of BMT Tax Depreciation. Please contact 1300 728 726 or visit www.bmtqs.com.au for an Australia wide service.
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