Tax Depreciation
"Many investment property owners are unaware of depreciation allowances and miss out on thousands of dollars in tax deductions each year."
 |
FAST FACTS
Ensure you maximise your investment property return by claiming the depreciation.
As properties get older, they wear and depreciate in value. To compensate the taxpayer for this, the ATO (Australian Tax Office) allows investment property owners to claim the decline in asset value as a tax deduction each year. All deductions are listed under the Capital Works Allowances (Division 43) and plant & equipment (Division 40) of the ATO. To be eligible for these deductions:
- the investment property must be owned by the taxpayer
- the investment property must be income producing, or be ready for the purpose of income production i.e. producing an income from tenancy or business related income.
Many investment property owners are unaware of depreciation allowances and miss out on thousands of dollars in tax deductions each year. All properties, old and new depreciate in value. That includes very old properties.
In order to claim depreciation allowances, anyone should obtain a Tax Depreciation Schedule. As qualified Quantity Surveyors and registered Tax Agents, Gantt is authorised to prepare Tax Depreciation Schedules. We ensure all deductions are identified in accordance with the ATO rules and regulations.
WHY CHOOSE GANTT PROJECT SERVICES?
At Gantt Project Services, our only goal is to create value for our clients. We do this in three easy steps:
- Our service is tailored and personalised. There are no lengthy forms and we do all the legwork. Our customer service consultant will contact you to obtain all the necessary details.
- We apply industry knowledge and professionalism to deliver ATO-compliant Tax Depreciation reports.
*Did we mention that our Depreciation Report fees are 100% tax deductible!
OUR PROFESSIONAL RECOGNITION
Gantt Project Services are registered with the Tax Practitioners Board as Tax Agents and are fully qualified to prepare tax depreciation schedules for investment properties under the Tax Agents Services Act 2009.
All our Quantity Surveyors are active members of the Australian Institute of Quantity Surveyors (AIQS). The AIQS is a professional standards body that ensures all practising Quantity Surveyors are dedicated to maintaining the highest standards of professional excellence.
THE PROCESS
STEP 1:
Please complete the inspection request form or call us on +61 (0) 439 781 239. This gives us the opportunity to discuss the property in greater detail.
STEP 2:
We will arrange an inspection time that is convenient for you. If tenanted, one of our team members will contact your agent to arrange an inspection time with the tenants and/or agents.
STEP 3:
We inspect the property. This is where we measure, take photos and list any depreciable items and/or items that may qualify for the capital building write off. This includes common areas within strata title properties. Back at our office, the information is analysed and the depreciation report is prepared.
STEP 4:
Your tax depreciation report is finalised and sent to you within 10 days of inspection.
THE JARGON
Division 40 & Division 43 are the ATO legislations that relate to Capital Allowances and depreciation of plant & equipment. By applying these tax deductions in a tax depreciation report, investment property owners are able to claim the wear and tear associated with these properties. The professional Quantity Surveyors at Gantt Project Services will ensure the correct balance between Division 40 and Division 43 is applied to ensure that your claim is maximised within ATO guidelines.
Division 40 governs deductions relating to the internal fittings and fixtures such as ceiling fans, air-conditioning units, whitegoods, carpets and flooring, etc. (also known as plant & equipment). These items typically have a depreciation rate ranging between 10%-40% per year and have an effective life set by the Australian Taxation Office (ATO).
Division 43 governs deductions relating to the building structure or building construction costs i.e. items that are deemed irremovable. The age of the property will be taken into consideration and will be depreciated at a rate of 2.5% or 4% per year (depending on year of construction) over a 40 year period.
Under the taxation ruling TR97/25, the Australian Taxation Office (ATO) lists Quantity Surveyors as one of the selected qualified professionals who are able to prepare depreciation reports on behalf of investment property owners and taxpayers. This is due to the nature of the estimate i.e. Quantity Surveyors are specifically trained in calculating building construction costs.
FREQUENTLY ASKED QUESTIONS
"Old or New? Deductible Renovations? Accountant or Quantity Surveyors? We’ve put together a FAQ section to address all of your questions."
Q1. WHAT IS A TAX DEPRECIATION SCHEDULE? DO I REALLY NEED ONE?
As properties get older, they wear and depreciate in value. To compensate the taxpayer for this, the ATO (Australian Tax Office) allows investment property owners to claim the depreciation on the building and plant & equipment items as a tax deduction each year. This deduction reduces the investment property owner’s taxable income. To be eligible for these deductions:
- the investment property must be owned by the taxpayer
- the investment property must be income producing, or be ready for the purpose of income production i.e. producing an income from tenancy or business related income.
- If you wish to claim these depreciation allowances you should obtain a tax depreciation schedule.
- As qualified Quantity Surveyors and registered Tax Agents, the staff at Gantt is authorised to prepare Tax Depreciation Schedules. We ensure all deductions are identified in accordance with the ATO rules and regulations.
Q2. WHAT CAN I CLAIM?
Plant & equipment items (fixtures and fittings) as well as building write-off allowance can be claimed where a building and taxpayer qualifies (see FAQ 1).
Q3. HOW OFTEN SHOULD I HAVE A TAX DEPRECIATION REPORT PREPARED?
Only once. Once for the lifetime of ownership of the property. Unless you make significant modifications/renovations. You will need to contact us to arrange an adjustment to your tax depreciation report.
Q4. CAN I CLAIM FOR OLDER PROPERTIES?
Absolutely. Both new and old properties attract depreciation deductions. If a property owner has not claimed any tax depreciation deductions, they are able to submit an amendment/adjustment for up to two previous financial year’s tax returns.
Q5. WHY ARE REPORTS FOR 40 YEARS?
The Australian Tax Office (ATO) determined that any building has a maximum effective life of 40 years. Investment property owners can claim up to 40 years depreciation on a brand new building and the balance of the 40 year period from construction completion for older properties and building.
Q6. WHAT IS SCRAPPING?
Scrapping occurs when a depreciable asset is removed and disposed of. When an item is scrapped, the residual amount (the amount that is yet to be written off for the item) can be claimed at 100% tax deduction at the time of disposal.
Q7. WHAT IF I RENT OUT MY OWN HOME?
Once you vacate your own home and make it available for rental, you can start claiming depreciation. Remember to ask your Accountant about the CGT implications of renting out your own home.
Q8. CAN MY ACCOUNTANT PREPARE A TAX DEPRECIATION REPORT FOR ME?
Your Accountant may assist, however, if your residential property was built after 1985, your Accountant, Solicitor or Real Estate Agent is not allowed to estimate the construction costs. Taxation Ruling TR97/25 list Quantity Surveyors as one of very few qualified professionals that are permitted to make the appropriate estimate on construction costs, if these costs are not known. We highly recommend that you seek the services of a qualified Quantity Surveyor for all property depreciation estimates in order to ensure the maximum allowances are recognised and included.
Q9. HOW LONG DOES THE PROCESS TAKE AND WHEN WILL I GET MY REPORT?
Once we have gathered the necessary information regarding the property, we will schedule an inspection at your / your tenant’s convenience within the next few days. A Quantity Surveyor will visit the property and prepare the report. You will be sent a copy within 10 days of the inspection date.
Q10. HOW DO I ORDER A REPORT?
Simply fill in your details on the Contact page or call us on +61 0439 781 239. Our customer service consultant will contact you to obtain all the necessary details.
We ask the right questions to ensure our reports maximise your tax returns.
Have we missed something? Please feel free to contact us with any questions not covered in the FAQ section!