Now’s the time to start the ball rolling so that your property report can be completed well in time for the end of the financial year.
Whether your investment property is a residential or holiday rental, The Property Shop Mudgee has the expertise to prepare the reports that are essential if you’re to keep your money rather than sharing it with the Tax Man.
Depreciation is a cost you claim on your investment property for the general ‘wear and tear’ of your property.
There are two types of property depreciation allowances available:
Plant and Equipment refers to items within the building like ovens, dishwashers,carpet, light fi ttings, blinds etc.
Each item has its own rate of depreciation.
Building Allowance refers to construction costs of the building itself, such as concrete and brickwork.
It only applies to buildings or improvements made after July 18 1985.
Both these costs can be offset against your assessable income.
Plant and Equipment
This can be quite complex to calculate. Each item has its own rate of depreciation such as blinds that could have a rate of 20% for 5 years while ovens could have 10% rate for 10 years.
But before you even go down the dollars and cents path you need to address the nuts and bolts, enlisting your agent to prepare a report on the items in your property.
The more time you allow for this the better, as the agent will need to organise access and a property inspection with the tenant at a time that suits both parties.
If you know the cost of construction for the entire building or renovations, the tax rates are as follows:
• If the building was constructed/ renovated between July 18, 1985 and September 15, 1987, depreciaton is calculcated as 4% of the building cost for 25 years.
• If the building was constructed after September 15, 1987, you can claim depreciation of capital works for building and landscaping at a rate of 2.5% for 40 years.
Hence, most properties constructed before 1985, cannot claim building allowance unless renovations were made.
Property Depreciation Calculator
The best way to calculate your property depreciation allowance is to obtain a Quantity Surveyor to create a schedule for you. This schedule provides you with your allowances for the next 10-20 years so you only need to obtain it once, if no internal or external changes occur.
You can also use a Tax Depreciation Calculator or call The Property Shop to access potential deductions available to you. The allowances indicated on the calculator are estimations only for properties you are about to purchase. The amount indicated would be an estimation of the amount you can deduct.
Always check with your accountant as to what deductions you are entitled to and how depreciation will affect your investment property and particular financial situation.