66 per cent of investment properties have one thing in common

by | Dec 13, 2021

BMT Tax Depreciation has been helping property investors claim thousands of dollars in depreciation deductions for decades. A look into the schedules they have completed in the last three years has revealed an interesting statistic: 66% of these investment properties have undergone a renovation or an addition.

What does this 66 per cent mean? 

This statistic means that two thirds of properties will contain valuable tax deductions that are only identifiable by a trained eye, and which could result in thousands of extra dollars back at tax time.

These deductions may arise from performing a full renovation or from simply installing a new hot water system and come in the form of tax depreciation.

So, what is property depreciation?

Depreciation is the natural wear and tear of property and assets over time. Investors can claim depreciation on the eligible assets and structure of their investment properties as a tax deduction each financial year.

It can only be claimed under two specific categories. The first is capital works which is the structure of the building and fixed assets like windows and doors. The second category is plant and equipment which includes the easily removable or mechanical assets like carpets, furniture and air-conditioning units.

A tax depreciation schedule is essential to claiming any depreciation that is available. This document outlines every depreciation deduction available from the property for up to forty years. Over the past twenty years, BMT Tax Depreciation has completed over 700,000 of these schedules across all types of residential and commercial properties.

What does this do to the depreciation claim? 

Essentially, an eligible improvement such as a property renovation allows the owner to claim extra depreciation deductions on the addition.

There are two key things to remember to make the most out of any addition.

The first is any recent renovation won’t be impacted by depreciation legislation changes introduced in 2017. This means the owner can claim any plant and equipment deductions on eligible assets within the renovation, even if the property was purchased second-hand after the legislative cut-off date of 9 May 2017. While any structural improvement, like a new door and frame, can be claimed for the next forty years with capital works deductions.

The second is to remember that anything added to an investment property should always be reflected in the property’s tax depreciation schedule. This ensures every single depreciation deduction is claimed for both the existing and added assets.

If the owner already has an active tax depreciation schedule, they can get it updated and amended. If they are yet to obtain a schedule for their property, they can contact a specialist quantity surveyor, such as BMT, top organise a free estimate of likely deductions available and quote.

BMT Tax Depreciation find any renovation or addition, no matter how big or small, through conducting a physical site inspection. Without a site inspection, it can be hard to find these, especially those additions hidden to the untrained eye.

This involves a specialist site inspector attending the property and inspecting every inch to ensure depreciation deductions are claimed to their full potential. The site inspection also ensures that any depreciation deduction is claimed with full compliance.

To learn more about depreciation and how to claim it on the renovations you have made to your investment property, contact BMT on 1300 728 726 or Request a Quote today.

 


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The material on this page and on this website has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained on this page and on this website is General Advice and does not take into account any person’s particular investment objectives, financial situation and particular needs.

Before making an investment decision based on this advice you should consider, with or without the assistance of a securities adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances. In addition, the examples provided on this page and on this website are for illustrative purposes only.

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Chan & Naylor
Chan & Naylor

Chan & Naylor is Australia’s leading property, business, tax-accounting & wealth advisory group with offices nationwide.

The Chan & Naylor Group has national offices in South West Sydney, Sydney CBD, Pymble and Parramatta in New South Wales, Wheelers Hill, Melbourne and Moonee Ponds in Victoria, Brisbane in Queensland, and East Perth in Western Australia that can assist you with your accounting needs. Contact us here today.

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