Tax depreciation benefits can boost investors’ cash flow

One of the most significant trends in the Australian property market has been the major slowdown in rental growth rates for investment properties during the past 12 months.

According to the latest analysis from CoreLogic RP Data, rental rates across the combined capital cities increased by 0.1% in May 2015 and are now increasing at their slowest pace on record.

Over the combined capital cities, rental rates were recorded at $488 per week and they have risen by just 1.5% over the past 12 months.

While capital city rental rates continue to rise, the rate of increase has slowed markedly from an annual increase of 2.2% a year ago to 1.5% currently.

Rental growth is slowing because record low interest rates has seen a flight of renters from investment properties into the new housing market, while the boom in apartment construction has seen an oversupply of rental properties in several capital cities.

This record slowdown in rental growth highlights the need for property investors to boost their cash flow by claiming their full tax depreciation benefits which can be equivalent to 60 per cent of the annual rental income of a typical investment property.

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 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 household items through depreciation benefits.

It may 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.

Many investors in Australia totally underestimate the number of items that can be depreciated for tax purposes and this comprehensive list can include cubby houses – and if they own an apartment, common areas such as car parking and recreational facilities.

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.

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).

Employing a company who is a member of AIQS such as DEPPRO gives protection to consumers that their tax depreciation report complies is completed in a professional manner.