As an investment property owner, you have to declare the rent you receive as income when you lodge your tax return with the Australian Taxation Office. As you likely know, you can subtract the expenses incurred in order to earn that income — popular expenses include lawn maintenance, repairs, new appliances and so forth; however, if those are the only expenses you are claiming, you are not maximising your tax return.
You may also claim write offs for the depreciation of multiple fixed irremovable assets within the properties you own. Whether you are new to the investment property game or been around for a few years, here's what you need to know about this claim:
1. Both residential and commercial investment properties qualify
If you want to claim these depreciation deductions, you are eligible to claim them for both residential and commercial investment properties. The only requirement is that the properties are income producing. You cannot claim these deductions for personal property. Essentially, these deductions encompass the losses you incur due to wear and tear on the property.
2. Depreciation schedules vary based on when the property was built
Depreciation schedules are not the same for every building. Rather, they vary based on when the structure was built. Properties constructed after September 15, 1987 have a depreciation rate of 2.5 percent, meaning you can write off 2.5 percent of the assets cost every year for 40 years. Buildings constructed before that date still qualify but face a different depreciation rate.
3. Structural Improvements also qualify for depreciation deductions
In addition to the main part of the building, you may also be able to claim depreciation deductions for structural improvements. To qualify, the improvements must have been started after February 26, 1992. The ATO classifies things like sealed driveways and retaining walls as structural improvements.
4. You can retroactively claim depreciation deductions from previous years
If you want to reduce tax liabilities from previous years and you haven't claimed these depreciations for those years, you may retroactively claim them. You may want to work with an accountant as these professionals can help you amend past years' returns.
5. Quantity surveyors can help
If you paid for construction yourself, you likely know the cost of the irremovable asset in the building. If not, you may need help from quantity surveyors to estimate the appropriate numbers.They can create a depreciation schedule for you so that you can claim the capital works deduction.
For more information on a depreciation schedule, how to claim deductions and whether or not you qualify, contact an accountant or a quantity surveyor.
Share25 August 2016
Welcome to my blog! My name is Jules, and I have been running my own business since before I left school. Through the years as my business grew, so too did my tax burden. However, I recently discovered that for many years, I wasn't taking the right deductions and as a result was paying too much tax. I educated myself on the tax law, and I meet with several accountants who helped me navigate the expansion of my business. I hope that all small business owners and independent entrepreneurs can have a positive experience filing taxes, and because of that, I created this blog. I hope these facts, ideas and posts help you and your business to prosper.