Investment
Property Depreciation, Depreciation of Investment Properties
Another aspect to keep in
mind with any investment property is the tax advantages that a
property investor can claim in Australia under the umbrella what
is know as property depreciation.
This basically is a consideration
of the wear and tear on your property asset over time and the
ultimate reduction in value of that asset as a result of time.
So even though the probable
result will be a increase in value in the land content of your
investment, it is also likely the structural or building part
of your investment will deteriorate over time and as result of
the cost it is a accepted claim for loss with the ato as depreciation
of your asset.
The Australian tax office
has a useful guide to depreciation which explains the concept
behind depreciation allowances this is a general guide but the
concept is the same in regards to investment property depreciation
the guide is available in pdf by clicking on following link ato
depreciation guide
Research suggests that approximately
only 20% of investors fully utilize and take advantage of the
available tax depreciation benefits of their investment property
The point is Under Australian income tax law,
you are allowed to claim deductions for expenses incurred in earning rent,
including the depreciation of assets in the buildings and the cost of the
building itself.
For example, investors can claim capital
works deductions for the construction cost of residential buildings built
after July 1985.
Buildings are depreciated at a rate of 2.5% a year or 4% a year,
depending on when the building was constructed, and deductions are spread over a period of 25 or 40 years.
Deductions also apply to structural improvements or renovations to the property.
Property Investors can also claim investment property depreciation
for wear and tear on fixtures and fittings in the property, such as carpet, blinds, wardrobes,
curtains, ovens and many more items. Assets are depreciated over their effective life,
on which the ATO regularly publishes guidelines.
Many property investors don't claim depreciation
because they haven't commissioned a tax depreciation schedule (TDS).
As soon as you buy an investment property, you probably should get a TDS prepared by a quantity surveyor.
Once you get the TDS, your accountant can put the numbers in the tax returns.
In terms of buildings, only a surveyor can value the building for tax purposes and then work out capital
works depreciation allowances; although an accountant can help you depreciate assets.
There is a common misconception
that only new properties are eligible for depreciation allowances
but this is not the correct. It is true that new properties attract
higher returns of depreciation, older properties can produce depreciation
in 99% of cases.
|
|
Find
the best real estate agent and receive a refund off the agents
selling fees more.....
Selling with a Refund –
like WOW.
What an innovation. You get
real estate agents screened for you to offer the best service
AND get a bonus at the end.
There is nothing like seeing
the many thousands of dollars spent on real estate commissions
on your final settlement statement and knowing that a part of
it will come back to your own pocket.
Scott and his team are ground
breakers and I can’t thank them enough for the wonderful communication
together with the prompt and efficient service I received. Thanks again.
Rachael Manners,
Western Australia
|