One of the most important things you can do is to have a Tax Depreciation Schedule prepared on your residential investment property.
- Depreciation is the natural wear and tear of property and assets over time. It’s normally thought of as a high-value, slow-burn deduction as it takes up to forty years for an entire property to depreciate.
- To complete a legitimate depreciation schedule, a qualified Quantity Surveyor must inspect the property. The cost is a few hundred dollars – but the potential savings in tax should make it worth your while, the fee is tax deductible!
- When preparing your tax depreciation schedule, the Quantity Surveyor will analyse the asset against the relevant rules. They will consider the cost, use of the asset and whether it’s substantially identical to other assets.
- There are two types of deductions that can be claimed as depreciation. One is ‘plant and equipment’ such as appliances, air conditioning and the hot water system.
- The second is the ‘building allowance’ which covers the construction costs.
Landlords often have the mistaken belief that depreciation can be claimed only on new properties. If your investment property was built after 16th September 1987, you may be able to claim both the plant & equipment and the building allowance. If your investment property was built prior to this date, you can probably only claim for plant.
Another important tax measure is to keep a detailed record of your expenses and income relating to the property. Typical property related expenses that can be claimed include;
- The hiring of a tax agent, accountant, conveyancer, or other professionals who provide services for your property.
- Maintenance and repairs costs.
- Advertising and letting costs.
- Travel to the property.
- Bank charges.
- Body Corporate fees.
- Borrowing expenses.
- Capital works.
- Council rates.
- Water charges.
- Stationery and postage.
- Decline in the value of depreciating assets.
- Land tax.
- Legal expenses.
- Interest expenses.
- Garden and lawn mowing.
Be organised with your documentation. Have tax invoices, receipts, record of rental, income, and a record of outgoings collated. This will reduce the cost the accountant would charge for valuable time spent requesting this documentation from you.
Kind Regards,
Urban Rentals
