5 simple tax deductions taxpayers overlook

Many Australian property investors may not know that a tax depreciation report undertaken by a professional tax depreciation company can identify hundreds of items in an investment property for which you can claim legitimate depreciation benefits.

As we about to enter a new tax year, owners of investment properties in Australia can significantly boost their cash flow by claiming these tax deductions on a large number of various household items through depreciation benefits.

Some of the legal, yet often neglected, deductions include:
1. Pumps attached to spa baths
2. Free-standing spas
3. Water tanks
4. Built-in coffee machines
5. Children’s cubby houses qualify as valid deductions.

It may also surprise many property investors that even garden gnomes can be depreciated for tax purposes.

Under taxation ruling TR2006/15, garden gnomes can be depreciated for tax purposes as plant over their economic life.

The tax benefits associated with negative gearing can be very significant, with some clients achieving tax benefits obtained through depreciation equivalent to 60 per cent of the total purchase price of the property. In some cases these tax benefits can total $300,000 based on a purchase price of $500,000.

To qualify for these legitimate tax deductions, an investor must have a fully compliant tax depreciation company undertake an onsite inspection of the property, then compile a depreciation report based on this inspection.

Estimates of tax depreciation benefits for an investment property made from an office desk will not be accepted by the ATO.

Depreciation is a complex area of taxation that requires a professional company to undertake a depreciation report because of constant changes in rules.

The ATO is now taking a more aggressive approach to tax deductions made by residential investors and has asked a large number to provide more details about their claims relating to property investment.

Property investors should check that the company undertaking their tax depreciation schedule is a member of the Australian Institute of Quantity Surveyors (AIQS).