Compiling the report properly
A depreciation schedule on your investment property can generate significant tax savings – as long as it has been complied correctly.
In my experience there are three main areas the Australian Tax Office tends to target come tax time.
1. Repairs and maintenance
One of them is whether you’ve claimed repairs and maintenance correctly. Now this can be tricky…
2. Income producing
Your property must also be income producing in order to claim depreciation.
For instance, if you make a repair while living in the property, then move out 2 months later, you can’t claim it.
3. Building allowance
The third area of concern is in relation to the building allowance.
The building allowance refers to the wear and tear on the actual building – things like bricks and concrete. You have to make sure they’re being claimed in the right category and not alongside items like carpets and blinds, which are considered plant and equipment.
The building depreciation allowance must also be claimed on construction costs – NOT the purchase price of your property. A mistake I see time and time again.
That’s where we can help! The Australian Tax Office (ATO) recognises Quantity Surveyors as the right people to estimate these costs. NOT valuers nor real estate agents.
Follow these rules
So there you have it. Make sure you follow these simple rules to stay under the ATO’s radar;
- Your repairs are being claimed correctly
- The property is an income producing asset
- The building allowance is based on the construction cost.
- And most importantly, use a qualified quantity surveyor.