When doing their tax return, property investors should be wary of rules surrounding depreciation. Image – Canva.
  • Many property investors fail to claim deprecation expenses properly
  • Some of these expenses can be backdated - depreciation schedules can also last for 40 years
  • James Fitzgerald reiterates the importance of seeking experts out, which is tax deductible too

As the end of the financial year approaches, property investors are being reminded that unknowingly they could be missing out on thousands of dollars by failing to properly claim depreciating during tax time.

James Fitzgerald, author of Bulletproof Investment, has urged investors to seek professional advice or risk missing out on deductions, noting that depreciation is one of the largest tax deductions available.

“Understanding how to calculate depreciation on your property and the difference in the rules regarding new and older homes, is essential to maximising your returns,” he said.

“It doesn’t matter whether you bought the property this year, or a couple of years ago.”

Under current rules, investors can claim depreciation on the structure and items of a building considered to be permanent fixtures, such as solar panels and security systems, as long as the property was built after September 1987.

For older properties, there could still be an ability to claim depreciation for structures that may have been added by a previous owner.

“It can be a complex area and you do not want to be relying on guestimates when it comes to the tax office,” Mr Fitzgerald said.

“When it comes to claiming depreciation on investment properties, it definitely pays to seek appropriate professional advice.”

James Fitzgerald, Bulletproof Investment authour

James Fitzgerald
James Fitzgerald. Image supplied.

While accountants can offer general tax deduction advice, if an investment property was built after 1987 and the construction costs were unknown, only quantity surveyors are qualified to estimate these costs.

“And their fees are completely tax deductible as well,” he added.

Considering this, here are Mr Fitzgerald’s five tips to maximise deductions and amp up cash flow for investors.

Five property investor tips to maximise deductions

  1. Breakdown claimable items.
  2. Keep on top of repairs/capital works
  3. Don’t wait to claim
  4. Review past years’ deductions
  5. Involve an expert

Breakdown claimable items

Mr Fitzgerald emphasised that maximising a claim is all about detail.

“Because depreciation is a calculated value, it’s likely that you will need a quantity surveyor to prepare a depreciation schedule for you,” he said.

“This details the depreciation entitlements that may be available, things like capital allowances and plant and equipment items.”

Additionally, it is possible to black-claim if you have owned the property for a few years and haven’t claimed any depreciation.

Keep on top of repairs/capital works

Next, Mr Fitzgerald noted there is a difference between repairs and maintnecaeveruss capital works that can affect your claim.

“Improvements to your property, like a renovation, improves the value and if considered capital may be eligible for tax depreciation,” he said.

“Anything you’ve replaced or got rid of can be claimed as a deduction so long as they’ve been removed from the property. A repair is something that is returned to its original state and retains its value, these earn themselves a 100 per cent deduction in the year of the expense.”

Don’t wait to claim

A depreciation schedule can be organised at any time, and partial-year claims can be made if your investment only just started producing income.

“Investors can make a depreciation claim based on the amount of days a property was available for lease,” he said.

Review past years deductions

Tax returns are allowed to be adjusted in the two years following submission. Mr Fitzgerlad said “this offers property owners an opportunity to recoup some of the deductions that may have been missed or undervalued on previous returns.”

Involve an expert

Lastly, Mr Fitzgerald reiterates that a property tax depreciation specialist will take the confusion out of the process, and assist in claiming the maximum benefits.

“They make sure your claim adheres to current legislation and guidelines and ensures that should you be audited in the future you will have a professional schedule that will be acceptable to the Commissioner of Taxation.

“Schedules last for 40 years,” he said.


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