The devil in the details for investors chasing depreciation benefits
Even the smartest investors may be surprised to find out exactly what items are eligible for tax deductions.
The Australian Taxation Office (ATO) recognises that the structure of a rental property, and the assets within it, can experience wear and tear over time and therefore allow tax concessions for owners of income producing properties to account for this deterioration, or depreciation in value.
“The ATO lists thousands of items that qualify for depreciation deductions and it can therefore be very challenging for property investors to ensure they have included every eligible asset in their claim,” BMT chief executive Bradley Beer said.
“Tennis umpire chairs, golf carts, pool tables and even ice-making machines are all examples of unusual items that hold tax deductions for many investors but are also easily missed in claims.”
Mr Beer went on to say that some of the most useful unique items for property investors at tax time are those that have been purchased for under $300, as their full value can be claimed in the first applicable financial year.
“Cutlery, soap holders and garbage bins might be seen by many as unusual items to hold tax deductions but they do, and as they typically cost under $300, they can be claimed immediately.
“While it’s important to not overlook somewhat unusual items, it’s equally important to account for the more obvious items as they may hold the vast majority of deductions.
“As examples, last financial year our clients claimed an average of $716 for carpet, $924 for packaged air-conditioning units and $468 for blinds.”
Mr Beer believes that one of the keys to maximising tax depreciation claims is to not DIY your own claim.
“One of the most common mistakes we see in DIY depreciation claims is investors missing items that they can legitimately claim for,” the CEO said.
During the 2016-17 financial year, BMT found an average depreciation claim of $8,845 for its clients’ properties. This was $5,097 more than the average depreciation claim lodged with the ATO by investors in the same financial year, which suggests that self-assessors are leaving thousands of dollars of tax savings unclaimed each year.
“With tax time upon us and challenging conditions in many property markets, we would encourage all property investors to ensure that a qualified quantity surveyor has assessed their property and provided a tax depreciation schedule to base a claim off,” Mr Beer said.
“A tax depreciation schedule is itself tax deductible and will allow you to rest easy at night knowing that experts have likely picked up every common and unusual item while also depreciating them at the correct rate to help you maximise your claim.”
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