Depreciation deductions ‘never needed more’ for landlords

Owners of income-producing properties can often claim sizeable tax deductions for the wear and tear that occurs as a building gets older and items within it wear out. These deductions are known as property depreciation, Mr Beer explained.

“BMT has seen growth in orders from savvy property investors who will claim their schedule fee straight away in this year’s tax return,” he noted.

“Property investors should take up every opportunity to improve their tax return this year. Experienced investors know to use a specialist quantity surveyor to find every available depreciation deduction on their property.

“At BMT, we find significantly higher annual deductions than people who DIY their depreciation. In the first full financial year, we find clients an average of almost $9,000 in depreciation deductions, much higher than the figures reported by the ATO.”

By way of example, Mr Beer pointed to a new house worth $730,000. He said this would typically yield first full financial year depreciation deductions of $15,519 and cumulative deductions of $69,523 over five years. Meanwhile, a second-hand unit worth $570,000 would yield first full financial year depreciation deductions of $5,874 and cumulative deductions of $24,670 over five years, he said.

“A property can hold significant hidden tax deductions that only an expert can find. For instance, you may be able to claim on renovations, even those completed by previous owners. This could result in thousands of additional dollars back at tax time,” Mr Beer said. 

Furthermore, Mr Beer noted that investors of strata title property should also remember to claim deductions held in common areas.

“Apartment owners can claim on common property assets like lifts, ventilation fans, carpet, intercom system assets and air conditioning.

“For an apartment worth $600,000, this could result in extra deductions of around $1,500,” he said.

In terms of advice, Mr Beer concluded:

“Make sure your depreciation method is aligned to your cash flow goals. You will see larger depreciation deductions in the earlier years of property ownership with the diminishing vale method, while you will claim a lower but more consistent proportion of deductions for longer with the prime cost method.

“With tax time fast approaching, I recommend all property investors speak to a qualified quantity surveyor to organise a tax depreciation schedule, if they haven’t already.”