Tax Time Benefits For Property Investors

Unless you’re an accountant, tax time is a pretty awful time of the year. The tax laws in Australia are nearly as traumatic – they are confusing, strange and written in language that can be coma inducing. So most of us are unaware of (completely legal) ways of reducing the amount of tax we are required to pay, and increasing the cash in our pockets. For individuals who own residential invest properties, with a tax depreciation report, (also known as a tax depreciation schedule) you can claim ‘wear and tear’ on the property, reducing your taxable income. Find out more services about tax depreciation report, see this page.

A tax depreciation report is really just fancy government speak for a document that details the wear and tear (damage or ageing over time) of a particular property. In the land of accounts, this means that as a property gets older, it decreases (or, depreciates) in its monetary value. So, the main purpose of a depreciation report is to outline to the tax department all the areas that you have potentially lost income on this property, or the areas that have decreased in value. The report means that you can minimise your taxable income and ultimately pay less tax. Less tax, means more money for the owner of the property, and no one is complaining about that. 

In Australia, this tax deduction is covered under the Tax Assessment Act (1997), and is recognised in two sections; division 40 and division 43. Division 40, is concerned with plant and equipment so everything from blinds, curtains, kitchen appliances and garden plants are able to be claimed as part of a tax depreciation schedule Brisbane. This division is not affected by the age of the property, so regardless of how old appliances or plants are, the property is still able to be claimed as a depreciating asset. The structural elements of the property (beams, trusses, tiling, roofs, cladding etc…) are part of division 43. The guidelines for this division are a little more stringent, building must have been built after July, 17th 1985 (for residential buildings) to be eligible for a tax deduction. The tax deduction or ‘write-off’ is them calculated at a rate based on the age and use of the property – either 2.5% or 4% per annum.

Once the tax depreciation report has been done by a professional quantity surveyor, it is able to be used for the life of the property, providing that no extensive renovations or structural changes are made. The cost of the report is a one off that generally saves clients up to $6,500 each year on their tax return, making it worthwhile for those owning investment properties. For investors, it is a little initial financial loss, for great potential gain in the long run. And, it is much easier to take advantage of this tax break than most people in Australia think.