Maximising Your Property’s Tax Depreciation Potential

As June 30 approaches, we thought we'd send a reminder about ordering and paying for a Tax Depreciation Report before the end of financial year. If you are renting out an investment property, be it a house, unit, granny flat or commercial property, make sure you have a tax depreciation report completed on it. There could be thousands of dollars in depreciation deductions waiting to be claimed.

By ordering and paying for your report by June 30, you will be able to claim 100% of the fee as part of your tax return this financial year. You will also be able to claim the depreciation deductions you are entitled to - simply give your completed report to Lockwood and Ward and we will do the rest!

If you are unsure about the deductions you could be entitled to, we recommend a visit to www.bmtqs.com.au and use BMT’s free tax depreciation calculator. We have used BMT for many years and find their service to be excellent.

All types of income producing properties have substantial taxation benefits, over and above negative gearing, that the owner is entitled to claim as a tax credit. Any property, which is either rented or used for income producing purposes, is eligible to be depreciated.

In order to maximise the tax benefit a particular property will attract, the owner will require the services of a recognised property tax depreciation expert with specific construction costing skills and experience.

Tax legislation recognises only certain professionals within the construction industry as having the relevant qualifications to estimate the cost of building components for tax depreciation purposes. BMT Tax Depreciation, as property depreciation and construction cost consultants, are recognised by the Australian Taxation Office as having the expert qualifications and experience to produce estimates of construction costs.

The process of maximising a depreciation claim is based on an intimate understanding of the Income Tax Assessment Act, applicable Income Tax Rulings, Case Law and specific construction costing skills. Each property scenario is different and must be analysed by a specialist to optimise the depreciation benefits.

Particular buildings that will attract a claim include: investment apartments, houses, townhouses and duplexes, warehouses, commercial office buildings, office towers, shopping centres, childcare centres, hotels, nursing homes, hospitals, retail centres, industrial complexes and government properties for sale. Basically any building that is used for income producing purposes has potential for tax depreciation.

Building type Purchase Price Year 1 Depreciation Year 1-5 Cumulative Depreciation
1 BR Unit $300,000 $9,000 $40,000
2 BR Unit $400,000 $12,000 $50,000
3 BR Unit $450,000 $13,000 $57,000
Townhouse $300,000 $7,000 $30,000
Townhouse $400,000 $8,500 $35,000
Residential House $300,000 $7,000 $30,000
Residential House $375,000 $8,000 $32,000
Commercial $2.5m $100,000 $450,000
Industrial $1m $65,000 $300,000

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