Are you unaware of the benefits of depreciation on your investment property? Don’t despair. You are not alone and it is never too late to reap in on these benefits. Claiming depreciation is one of the most important steps in an investor’s journey. You can even claim retrospectively, with your investment’s depreciation able to be backdated two years. Your first port of call should be an experienced quantity surveyor. Shop around by all means, but industry leader, Washington Brown stands by its expertise by offering a great incentive to engage their company. If you do not save twice the fee of their engagement, the cost of the report will be fully refunded. And on top of this, investors who engage Cramer Property as their Property Manager will receive a discounted report fee.
It is estimated that millions of dollars will be missed over the coming years in tax depreciation claims due to changes in what can be defined as plant and equipment. Laws change frequently so it is essential that you have a report prepared by an expert in the field. If you are renovating a kitchen or bathroom in a property built after 1985 – get a quantity surveyor in before you demolish so they can assess what the residual value of the existing items are. This residual value can be claimed as an outright deduction and can generate huge savings in the first year. For instance, a rental property with a 20 year-old kitchen could possibly attract an immediate deduction of around $5,000 if removed. The added bonus is that you get to claim depreciation on the new work once it is complete too!
A dollar today is worth more than a dollar tomorrow so deduct items as quickly as possible. Individual items under $300 can be written off immediately. An important thing to remember here is that provided your portion is under $300, you can still write it off. For instance, say an electric motor to the garage door cost an apartment block $2,000. If there are 50 units in the block, your portion is $40. You can claim that $40 outright – as your portion is under $300. You can also try to buy items that depreciate faster such as purchasing a microwave that costs $295 as opposed to one that costs $320. Items between $300 and $1000 fall into the Low Pool Category and attract a higher depreciation rate. So for instance, a $1200 television attracts a 20% deduction whilst a $950 television deducts at 37.5% per annum.
Even properties built before 1985 (when the building allowance kicked in) are worth depreciating. The purchase price of your property includes the Land, Building and the Plant and Equipment. A highly qualified quantity surveyor can help you apportion or break down the purchase price into those categories. As an investor, you can go on the Washington Brown website, free of charge, to get an instant estimate of the likely tax depreciation deductions on a property before they buy it. This calculator uses real life data collated from every inspection we do on behalf of our clients. So the data gets more accurate with time.
Please note: Cramer Property do not have a commission or referral fee arrangement with this company. We just believe in passing on valuable information and adding to our service by pointing out savings to our clients where we can.