Depreciation

As we approach the end of the financial year, property investors need to start considering getting their depreciation reports done for the taxman.

According to BMT Quantity Surveyors, the vast numbers of property investors are missing out on maximising their tax deductions and potentially tax funds.

What is property depreciation?

Tax depreciation is the depreciation that can be listed as an expense on a tax return for a given reporting period under the applicable tax laws. It is used to reduce the amount of taxable income reported by an investor or business. Depreciation is the gradual charging to expense of a fixed asset's cost over its useful life

Here are some examples of how depreciation reports can assist with your cash flow;

By making the most of the allowable depreciation using this example, the cash flow scenario changes substantially.

The depreciation report works better with brand new property; however there are still benefits with older homes as per this next example;

When can Tax Depreciation be applied?

  • Pre-purchase depreciation estimates
  • Tax depreciation calculator online
  • Recoup missed deductions
  • New, old or renovated

A depreciation report should include;

  • Total cost for all items/depreciation rates
  • 40 year projection
  • Diminishing value and prime cost methods, pooling schedule
  • Split reports

The ATO specifically states that Accountants, Solicitors, Real Estate Agents and Valuers ARE NOT recognised to estimate construction costs for depreciation purposes. Always seek the advice of professionals in this field.