Property depreciation is one of the largest tax deductions for homeowners in Australia. But did you know that you can backdate your property’s depreciation? Doing so could save you thousands of dollars every year.
As an investor, you need to take advantage of all the tax deductions Australia has to offer. Property depreciation deductions allow you to control your cash flow from your property. As a result, you can use them to enhance your property’s profitability.
Many who own an investment property in Australia claim depreciation yearly.
Unfortunately, some overlook these deductions entirely. Happily, you can backdate your depreciation claims. Firstly, let’s look at what property depreciation means.
You can claim for any loss of value resulting from the wear and tear of the property as it ages. Capital works are the building’s structural elements, and you can claim for all of them, including the roof tiles and the concrete used throughout the building.
You can also claim for the wear and tear of any equipment in the property. This includes things like the property’s fixtures, but extends to things like carpets and ceiling fans. (Deductions for these plant and equipment items may only apply if you bought the property prior to May 9, 2017 – Read about the Budget changes here).
Claiming for your property’s depreciation is one of the most effective tax deductions in Australia. It allows you to reduce your yearly taxable income, which means your tax bill also decreases. When used correctly, depreciation allows you to take home more money each year.
Behind the deductions you claim for interest expenses, depreciation is one of the largest tax deductions in Australia. However, many investors fail to claim for all their property depreciation. Some even forget about it entirely, which could result in the loss of thousands of dollars over the lifetime of your investment.
Using Backdating to Claim Depreciation
So, what can you do if you haven’t claimed for all of the depreciation you’re entitled to? This is where backdating can help you.
There are two key steps you must take to backdate depreciation properly:
Work with a Quantity Surveyor to create a full depreciation schedule for your property. Your surveyor will inform you about every item you can make a claim for. They will also discuss rental property depreciation rates with you.
Bring the surveyor’s depreciation schedule to your accountant. He or she will alter your tax returns so that you claim for all of the depreciation you’re entitled to.
In most cases, you can only backdate depreciation for two years.
What is a Tax Depreciation Schedule?
If you’ve never claimed for your property’s depreciation, you may not know what a tax depreciation schedule is.
The schedule your Quantity Surveyor creates, offers a summary of every item in your property that depreciates in value. Think of it as an investment property tax deductions calculator focused solely on depreciation. The schedule notes every item, and informs you of how much you can claim for each over the course of the next 40 years.
As noted, your accountant can use this schedule to backdate your tax returns for the previous two years. However, they will also use it to help them to complete your future tax returns. This ensures you claim properly for all future depreciation of your property’s capital works and equipment.
Can I Backdate for More Than Two Years?
In most cases, you can’t backdate your tax returns for over two years. The Australian Taxation Office (ATO) has strict guidelines in place. These usually prevent you from exceeding the two-year limit.
However, that isn’t to say it is impossible. The ATO has different rules for companies than it does for individual investors. There are also different rules for those using a self-managed superannuation fund (SMSF), or a trust.
As a result, it’s worth speaking to your accountant to find out if your situation allows you to backdate for more than two years. It’s unlikely, but you may strike it lucky and be able to claim for even more depreciation than you expected.
Is Backdating Worth It?
Yes, it is. If you don’t account for your investment property depreciation, you could lose out on thousands of dollars every year. In fact, claiming for depreciation can turn a negatively geared property into a positive one.
On top of that, you can also claim the cost of your Quantity Surveyor as a tax deduction.
The Final Word
That’s everything you need to know about backdating depreciation. Speak to your accountant today to find out how far you can backdate your claims.
Washington Brown is here to help if you need a quality Quantity Surveyor. Contact us today to get a full depreciation schedule for your investment property.
Peter: The attendance tonight is mind blowing. In the world of depreciation, this is very much the equivalent of playing to a packed stadium. So thank you all for your interest.
Tyron Hyde: Peter, I’ve never been more popular.
Peter: Yeah, well. That’s right. In the quantity surveying world, this is as good as it gets I think.
Tyron Hyde: Sure.
Peter: Look, as all of you know the federal budget announcement at 7:30 pm on Tuesday the 9th of May included proposed changes that will significantly affect the way property investors claim depreciation in Australia from now on. Please feel free to type questions in the question panel as we go, and we’ll certainly have a question and answer session a little later on, but for now, to talk you through the ins and outs of these proposed changes, I’d like to hand over to Washington Brown’s Director, Tyron Hyde.
Tyron Hyde: Thank you Peter. I just want to confirm you can hear me okay?
Peter: Yip, all good on this end. Yip.
Tyron Hyde: Okay, great. Okay so, firstly thanks for coming. I know you can be doing other things tonight like watching the Swans or the Sharks and you’ve chosen to come here and listen to a talk on depreciation, but if you’re a property investors it’s probably a wise decision, because in my view what’s about to occur in the property investor market, is huge.
There are big changes ahead and I think we need to understand that, but before I get into those I just want to have a quick vote or a quick poll. I’m curious, how many of you have actually bought an investment property prior to the budget on May 9, 2017? So Peter’s going to put up a quick poll and you can vote or answer “yes” or “no”, whether you did or not. That’ll be great. So I’ll just give a quick couple of seconds to do that. Thank you.
Now let me tell you, you’re the lucky ones because what you’ve entered into will not change. If you bought an investment property prior to the budget, you’re lucky because these changes will not affect you, but I’ll go into that a little bit further down the line. But there are changes ahead and we need to be aware of them, and as property investors, we need to strategize about how it’s going to affect our future investments because the budget had changed the game.
The investment equation is altered significantly since the budget and I’ll explain that more shortly, but before I do that, a little bit about myself. My name’s Tyron Hyde, I’m the CEO of a company called Washington Brown. We’re Quantity Surveyors and as Quantity Surveyors, we work out what things cost to build. A large part of our business is in the preparation of depreciation schedules. So we go out to the audience and we identify what the construction cost of the property was and what the final equipment that you buy in that property contains.
So, we give you a report that says you can claim certain amounts of deductions based upon the construction cost, and also what’s included in that property as well.
But in summary, as Quantity Surveyors, what we do is we work out what things cost to build, and the reason I’m here tonight was a ruling in 1997 called TR 97/25 and that identified Quantity Surveyors as being the appropriate body to estimate construction costs where the costs are unknown. It was a good ruling to me, because they identified that we’ve got a lot of work, but in the good old days i.e., let’s talk about the good old days.
In the good old days, roughly a month ago, what we’d use to do; we’d go out to a property as I said, and we would distinguish between the plant and equipment in the building and the building allowance, the structure of the building. Now the plant and equipment in the building are things like the ovens, the dishwashers, the carpets. Now, this is the stuff that’s going to wear out quicker. The other part of a report of depreciation schedule is what’s called the Division 43 allowance. That’s the building allowance. That’s the structure of the building, that’s the brickwork, the concrete, the windows etcetera.
Now in order for you to claim those allowances, the property has to be built after 1987. So what’s changed? Well, lots changed. What the government is proposing is exactly this. Now I often like slides with lots of images, but a couple of slides here you need to understand what the exact budget measure is. So let me highlight it here. Now, this is the budget measure, and I’ll read this.
“From July 1, 2017, the Government will limit plant and equipment depreciation deductions to outlays actually incurred by investors in residential real estate properties.” Now the key here is “actually incurred”.
Who actually incurred that expense? Was it the developer? Was it you? So what they’re saying is, if you buy a secondhand property, it’s guaranteed that if you buy a secondhand property, that oven in that property wasn’t yours. You didn’t actually incur that expense when you bought that depreciable item.
I don’t know who bought it, I don’t know who did, maybe the fairies bought it, but you as property investors didn’t actually incur that expense. So you can’t claim the depreciation of those depreciable items such as the ovens, dishwashers etcetera. Who wants some good news? Put your hand up if you want some good news. Me too. The good news is, it’s grandfathered. The proposed changes they’re about to make are grandfathered, and what that means is that if you bought a property prior to the budget, nothing changes.
Who wants some good news? Put your hand up if you want some good news. Me too. The good news is, it’s grandfathered. The proposed changes they’re about to make are grandfathered, and what that means is that if you bought a property prior to the budget, nothing changes.
The good news is, it’s grandfathered. The proposed changes they’re about to make are grandfathered, and what that means is that if you bought a property prior to the budget, nothing changes.
If you exchanged contract, let’s be clear on this if you exchanged a contract prior to the budget, nothing changes. If you’ve already got a report from Washington Brown, you continue to claim the depreciation exactly how it is. It’s moving forward from that date. So, if you did buy a property two years ago and haven’t got a depreciation report, now is a great time to get a report because you have the benefit of the old system. So if you did buy a property three years ago or two years ago, and haven’t got a report, now would be a good time to do that. You can actually amend tax returns to factor in that property that you haven’t claimed, so you can actually amend your tax returns for a
If you’ve already got a report from Washington Brown, you continue to claim the depreciation exactly how it is. It’s moving forward from that date. So, if you did buy a property two years ago and haven’t got a depreciation report, now is a great time to get a report because you have the benefit of the old system. So if you did buy a property three years ago or two years ago, and haven’t got a report, now would be a good time to do that. You can actually amend tax returns to factor in that property that you haven’t claimed, so you can actually amend your tax returns for a
So if you did buy a property three years ago or two years ago, and haven’t got a report, now would be a good time to do that. You can actually amend tax returns to factor in that property that you haven’t claimed, so you can actually amend your tax returns for a two-year period.
So, now would be a good time to get a report if you haven’t got one. What else is good news? Well, the other good news is this only relates to residential property. So offices, industrial properties, retail properties, there’s absolutely no change. This is only targeting residential property investors. The other good news is that
Well, the other good news is this only relates to residential property. So offices, industrial properties, retail properties, there’s absolutely no change. This is only targeting residential property investors. The other good news is that
The other good news is that there have been no changes to the Division 43 deductions. What does that mean? Well, as I said before, there’s two components of a depreciation schedule. There are the plant and equipment and there’s the building allowance. The building allowance is the structure.
So you can still continue to claim. If you’d buy a property today, you can continue to claim brickwork, the concrete, the roof, the scaffolding as shown in this image here, exactly as it always has been. But the issue is, and there’s a bit of confusion in the market and quite rightly so, as to whether these changes affect the new property, or is it just secondhand property? No one knows. I’ve been in meetings with other Quantity Surveyors firms and really, we are unsure. I’ve written to Treasury and asked them for their guidance as to whether new property can still continue to claim the depreciation of plant equipment, and I got the usual response, “We’re formulating this budget measure …”
That’s not good in my opinion because there’s a lot of people out there now buying property, brand new property, and not knowing the full impact of what their depreciation claim will be and no market likes uncertainty. Now the reason there is uncertainty is because of this. Let me read the budget statement again.
“Acquisitions of existing plant and equipment items will be reflected in the cost base for capital gains tax purposes for subsequent investors.”
Now the key is here “existing plant and equipment items”. So it’s pretty clear if it’s a secondhand property it’s an existing item, but what about if I’d buy a brand new property that’s being finished, but it’s two weeks old, is that an existing plant and equipment item? You tell me.
What happens if I buy a property off the plant and it hasn’t even been built yet? Is that existing because I’ve entered into a contract to do that? What happens if I flip that property in three years time, who can claim those existing plant and equipment items? It wasn’t clear in saying brand new property’s okay, a secondhand property is not and that’s why there’s confusion in the market.
The bad news, boo! Who wants the bad news? No one wants bad news. The bad news is definitely for a secondhand property, the way the budget statement is written and possibly new, not yet sure, but definitely for a secondhand property, you will not be able to claim depreciation on things like ovens, dishwashers, lights, air-con, television sets, blinds, carpets, all those depreciable assets.
If we’re talking about a high rise apartment here, we’re talking about the common property items that you cannot claim as well and that might be things like the lifts, your portion of the lift, your portion of the smoke detectors, your portion of the common carpet in the hallway, garage motor doors, all right. So all those kind of equipment items will in the future be part of the cost phase. Who wants some great news? We all want great news. The great news is, you’ll still need a QS, said that with a smile, but you’ll still need a Quantity Surveyors because in order to claim the building allowance, you’ll still need to work out what the actual cost of construction of the structure is, and that’s where we come in.
The problem is that it’s going to be less. So let’s put this into perspective all right. When you build a house, roughly probably about 15% … I said 80/20 there because when I went to iStock, there was no 85/15 rule, but approximately 15% of the construction costs of a unit or a house relates to the plant and equipment of a building, that’s the ovens, dishwashers et cetera. The other 85% relates to the construction cost of the structure of the building. It’s got a massive difference in the overall claim that you’ll be able to make over 40 years. The main difference is in the early years, and that’s when a property investor needs those claims.
Here are some charts showing what the difference would be. So let’s say you buy a brand new unit today for $850,000. Pre-budget, your first-year claim will be about $20,000. Today, post budget, if your property is not allowed, will be about $9000. The second year $17,000, the second year post budget $9000. You can see here on this chart by about the eighth, ninth year, it’s getting very similar but it’s in the early years where the big difference is and that is when an investor needs it. See after 10 or eight years, the rent’s gone up and it’s not as crucial to getting those big deductions. Now let’s look at another scenario. If you were to buy a property built in the year 2000 that cost $850,000, today or pre-budget you’d get about a $15,000 year one deduction. Post budget you get about $6000 in my opinion. It’s about a third.
Again, year two $13,000, year to now, about $6000. The big difference is up front when you need it. About in year eight, year nine, it’s very similar, but again it’s the early years when and investor needs that to make it affordable. Now let’s look at a property built in 1986, and as I said before, a property has to be built after 1987 in order for you to claim the structure of the building. So, in this case, a property built in ’86 will get you $0 now if it has had no renovation. Pre-budget you might be able to claim $6000 in the first year, second year $3,000 and that relates to the plant and equipment, but because post budget you can’t claim the plant and equipment, there’s zero.
In my view that’s not going to occur a lot because most properties built before ’86 has had some renovation on it. It’s very hard to rent out a unit that was built in, say, 1980 that hasn’t had some capital improvement on it, new kitchen, new bathroom tiling, etc etcetera. So this is a bit of an exaggeration because most properties built before ’86 have had some capital improvements to them, but it highlights the difference between a property built before ’86. Now, why is the government doing this?
There are a couple of reasons in my view. The first reason, as the budget statement says is, “This is an integrity measure to address concerns that some plant and equipment items are being depreciation by successive investors in excess of their actual value.”
You know what? I agree with them, a 100% agree with them. The reason is, there’s hasn’t been a lot of legislation or guidance on how you actually value second-hand plant and equipment attached to buildings, attached to land. Let me give you an example of this, and this actually occurred … I’m sitting at 321 Pitt Street right now and last week a unit in our block, in our Strata building here, sold for $600,000. The next day, someone came along and gave that guy $800,000 check to take it off him. So he made $200,000 in one day. Now, how do we as Quantity Surveyors value the carpet that was sold with the $600,000 purchase and then the next day, value it when someone bought it for $800,000?
In theory, even though it was a day, the carpet depreciated and because someone paid a lot more for it, didn’t they just pay a bit more for that carpet that was situated in that suite? I would argue “yes”. Now, this is a very different scenario to the building allowance because the building allowance and the structure of a building are based upon its actual cost. So it has no bearing in relation to what the purchase price was, but plant and equipment are based on what you pay for it. That’s the confusion. The other issue is to address housing affordability, and I agree that if you’re in Sydney or Melbourne right now, not in a lot of parts in the country, but in Sydney and Melbourne right now if you’re on a medium wage it’s pretty hard to get into the market no doubt.
I’m not sure though if these measures are the correct way to address housing affordability, I’ll go through that shortly. So will it work? Well, if you ask me, the government’s got themselves into a pickle. There is a fork in the road, as I’ve shown by this fork and pickle, that they’re going to legislate this two ways and I do truly believe that when this budget statement came along, there was a lot of people in the ATO saying, “How on earth do we legislate this?” So there are two paths they can take now. One is to allow new a property to be depreciation and then the second purchaser thereafter can not, or all property, new and secondhand property, can not claim the plant and equipment as a depreciable asset.
So let’s look at these options. So if they say that new property’s okay, well, don’t you think that near new property will struggle to sell? Say I want to buy a property, if the developer down the road is selling a brand new unit and he’s saying, “I can get you $20,000 in depreciation” to someone who’s got a similar unit nextdoor that’s two years old and there’s far less depreciation, I suspect that those people that have got the secondhand property would struggle to sell that. That worries me a little bit because I know there’s been lots and lots om mums and dads have been advised by their financial planners to take money out of their super fund and to buy this brand new unit. If they need to sell that in a couple of years time, a two-year-old property, in my view they’re going to struggle.
I think people will hold on to their property, don’t you? If I bought that brand new property three years ago and I’ve just seen that the law has changed, and if I go and buy another property, I can’t get the same depreciation allowances, I suspect that people will hold onto it. Now I’m not a great economist, but I do remember one thing about economics and that price tends to be a factor of supply and demand, and if there’s less supply in the market, prices could go up. I don’t know how that’s going to affect affordability. The other thing is, do you remember the Vendor Tax? I don’t know how many of you are here in New South Wales, but about 15 years ago, the state government in their wisdom here, decided to introduce a Vendor Tax on property, which was, in essence, a stamp duty on the way out.
It was about two and a half percent and they said, “Well, we’re going to slug you, two and a half percent of the sale price of the property when you sold it.” Guess what everyone did? They held on to their property. The revenue forecast for that was a quarter in the first year and they didn’t get the stamp duty, they didn’t get the forecast on the Vendor Tax, so seven months it was around and then they squashed that and said, “This doesn’t work.” I can see the same thing happening here. Let’s look at their other option. That all property, there’s no depreciation on plant and equipment. Well, if new property can’t be depreciation for plant and equipment, in my view, developers will struggle to get presales.
You know, when a developer is developing a block of apartments, they need presales to show the bank that this is a good job from a financing point of view, and in a lot of the way they do that is by getting investors to buy early on and they do that by mathematical modelling and a big part of that is in depreciation deductions. If they can’t get that, they won’t get funding so obviously they’ll struggle to get off the ground because not a lot of people say, “I want to buy that unit. In three years time I want to live there and be an owner occupied property” because things happen. Some of them get married, some have kids. The owner occupied market is more closer to the event, whereas investors can do the mathematics on it, hope the property goes up, know they’re going to get these depreciation deductions etc cetera..
So, that could limit supply, which again, how’s that going to help affordability? I don’t think it’s going to. And again, people that have already got property, will hold onto their property because they know that if new and secondhand property can’t be depreciated for their plant and equipment decisions, I’ll just hold onto it. It’s like what happened with the Vendor Tax in my view. I don’t think there’s been a great cost benefit analysis of this proposed change. This is from the government, this is from the budget statement. Their forecast, Treasury’s forecast over the three year period, they’re going to save $260 million from this, over a three year period.
How on earth they got that number is baffling to me, but in the overall scheme of things, I don’t think they’ve weighed up what the risk of changing people’s mentality of how to buy and sell property is. You see, there could be a loss of revenue in Capital Gains Tax. If some people at the moment though, “Well, I think the Sydney market or Melbourne market has peaked and I’ve made a half a million dollars on it” they might sell because they might think, “Well, you know, I can continue to claim these deductions.” Maybe. If they don’t sell and they don’t go a buy another one, well, they might be less stamp duty, or they can’t get into that new property because there’s less deductions, there will be stamp duty loss.
Another aside is this. If new property can’t be depreciate as well, well then construction activity will slow down. The Housing Industry Association says that for every $1 spent on a construction job, $10 filters through the economy. Now I know they HIA is quite pro property, well let’s assume they’re half right. It’s a big risk/reward scenario just to save $40 million in carpet deductions I the first year, if you ask me. Houston, we have a problem. Now I look at this from a technical point of view, because I’ve been dong this for 25 years and I can see how this actually works in terms of what we do as Quantity Surveyors and I think there’s some problems and some things that have not been thought out.
When I’ve been giving these talks, a lot of people say to me, “Well, I’m just going to split the contract. I’m going to buy a unit or engage a builder and say, ‘Well, just have the plant and equipment separate’ and then I actually buy that stuff” and that could occur. It depends on the legislation as to how that actually occurs, but I think the government will say that if [inaudible 00:22:50] at the time, it’s part of the property. I don’t know, but already whenever I’ve given these talks, people were already trying to work out how they can get around it without any legislation being written. I don’t think that’s a very good system that we’re going into.
Another issue is, let’s say a new property is allowed to be depreciation, what happens if I buy a brand new property, I live in it for five years, I did apply that, but then I moved out, can that person claim it? I’m not sure. Now, this is the trickiest one to me and I guarantee no thought has been on this. What happens if I buy … because as I said before, commercial property can be depreciation, but residential can’t. What happens if I buy a property that has a doctor suite or dental suite at the front or a retail space and has a retail down the bottom and a residential probably at the top?
So in that scenario, we can have the same carpet at the top, the same carpet down the bottom at the retail or the commercial space and the carpet downstairs is okay, but the carpet upstairs is not. We could have system where deducted air-conditioning goes throughout the whole building, but half of it is okay, half of it’s not. Then, when you sell it, you’d have to somehow split the capital gains cost base into the two and you could have a control system that’s just in the residential, but not in the commercial and I don’t want it there. Not a lot of thought in there if you ask me. So, I can see a CGT nightmare coming along with this, quite frankly, particularly in those areas where there are multi faceted buildings.
Here’s another thing. What about the building contract? What happens … so it says here, so if the plant and equipment is actually acquired by you. So if I engage a builder to build a house, could I acquire that plant and equipment, or do the builder? I’m not sure. I would assume where I’d engage a builder and having a building contract, I would actually acquiring that plant and equipment, so it would be okay. That’s an assumption, but that would be a different scenario to where a developer built a block and you buy it new. What I would think that moving forward, if you actually engage a builder
What I would think that moving forward, if you actually engage a builder to build a property for you or renovation, then you’re actually as part of that building contract, acquiring the plant and equipment within the building contract.
If not, again, people that I’ve spoken have said, “Well, I’m doing a renovation, do I need to split out the plant and equipment now, have that as what’s called a plant cost item, and acquire those items myself?” Seems a lot of work for the minimal reward that the government gets. So, I’ll stop talking about the problems. What the solution? Well, I’ve been involved with some meetings with the Australian Institute of Quantity Surveyors and some other CEO’s of leading firm and it’s quite simple if you ask me, and in reality it probably sort of what’s always occurred. That is, I’ll give you an example. So in my view, the plant and equipment item within a building should be based so the original purchase should be able to claim the depreciation item.
What’s the solution? Well, I’ve been involved with some meetings with the Australian Institute of Quantity Surveyors and some other CEO’s of leading firm and it’s quite simple if you ask me, and in reality it probably sort of what’s always occurred. That is, I’ll give you an example. So in my view, the plant and equipment item within a building should be based so the original purchase should be able to claim the depreciation item.
So that’s in this scenario here, I’ve got carpet here as a good example. At the opening day of a brand new unit, the carpet was $3000 and it was sold after 5 years. The costs to that second purchaser should be about $1500 because it’s gone through half its effective life. This carpet has an effective life of 10 years. So the value should be around $1500 and that reflects the historical cost of the carpet, and that’s what we do now with brickwork and concrete and the structure. We look at what it originally cost to build, and I think the same thing should happen with carpet. Similarly, if the property when I bought it was 12 years old and the carpet had a 10 year effective life, when I buy it today, it should be zero, because it’s already passed its used by date.
At the moment, we look at the carpet and we’ll say, “Well, based upon the purchase price you’ve paid XYZ for your carpet, even though it’s 12 years old.” I think this would address the government’s concern that investors are claiming successive amounts higher than they should be, and I agree with that. That would address that, but also I think this will be able to meet the budgets forecast measures. I think it’s a logical solution. As Quantity Surveyors we’re also trained to look at this stuff and there’s a system in place to implement that, and this would also not disrupt the new property selling market and the construction activity.
So we, as an institute and other learned colleagues, have written to everything politician, senate and lower house, suggesting this as a method that will not disrupt the property market. Here’s hoping. Can’t guarantee it, but it would make logical sense to me. Now Peter is going to run a poll, because I’m curious … look, I’ve got my views on this topic and I think … well, I’ll let you decide. We want to run a poll. We did this at lunchtime today and we asked people what they thought of this. So basically we’ll run a poll now. Poll’s open, I can on my screen and the poll is, I want you to answer … and we’re going to send these results to you tomorrow.
The question is, “Do you think limiting the amount of depreciation you can claim when purchasing a new property will help housing affordability?” So I’m just going to let you vote on that for a second, and as I said, we’re going to send you the results tomorrow. Is that right Peter?
Peter: Yeah, along with as special offer for attending the webinar too.
Tyron Hyde: Great. So let me know when we can go to the next slide? You know I chose this even though it’s got the American flag. Just thought he was really cute and just though I’d like him in there.
Tyron Hyde: All right, let’s move to the next one. I hope you voted on that, thanks. Now I wrote a book called “Claim it”. It’s very relevant today, because a lot of it talks about my property investment journey and property investing in general, but obviously parts of it might be a little bit outdated thanks to the budget. So I’ve been approached by my publicist to write another book and I need a new title.
Peter: I’d like to remind everyone that this was also a bestseller, isn’t that right Ty?
Tyron Hyde: Absolutely it as a best seller. I think it had to reach 7000 sales to be a best seller, but the fact that my mother bought 4000 copies is absolutely irrelevant. The wonderful thing about when she did that Peter, was she read it, she said, “Well Ty, that’s great. I actually know what you do now” which was wonderful. So some of the titles been bantered about are “Claim it 2”, “Keep claiming it”. My favourite so far is “Claim it 2, electric boogaloo”, but I would like you to recommend some. One of the ones at lunchtime today was, “Claim it 2, the demise of Scott and Malcolm” along those lines, but if you can suggest a title, that will … you never know, you might have a book named after you. So wonderful. I will send you a signed copy of that. We’re also going to, Peter, send a discounted rate to people after this webinar. Tomorrow I believe.
Peter: Yep, so look out for that tomorrow.
Tyron Hyde: Now I’m going to throw some questions. Whenever I’ve given this talk, I’ve had some fantastic questions. When I gave this talk in Melbourne last week on stage, but one guy put his hand up. He said, “Tyron, so what I’m going to do, is I own an old property, but what I’m going to do is I’m going to rip out all the carpet and the blinds and the dishwashers, all that plant and equipment stuff and sell it as a bare bones property, because then, when that new purchaser comes in, they can buy all those stuff themselves and claim the depreciation.” I thought it’s an interesting point.
So I was wondering if you guys and girls have any questions that you’d like to throw at us? I’m not sure that I can answer it, but I’ll do my best, but because there is a little bit of uncertainty about this topic, I’ll certainly endeavour to do my best.
Peter: Well Ty, we’ve certainly got a huge array of questions here, which is fantastic and we’ll try and get through as many as we can. So we’ll jump right in. Similar question asked by Minlee and by Michelle and they’re saying, but purely from a depreciation maximisation perspective with these new rules in place post budget, “What type of property should investment property should I be looking for?”
Tyron Hyde: Well, that’s a good question. Firstly I’ll say that tax driven investments are not what someone should focus for. Obviously commercial, industrial properties you’ll still be able to claim depreciable benefits and building allowance benefits. Just like residential properties, you can still claim the building allowance, but to me, the investment focus of an investor or should not be about the tax driven benefits.
You should be focusing on other things such as the infrastructure, yields etc cetera, and then make the tax benefits work for you. Easier said than done, but that should be the focus but clearly commercial properties and industrial properties will still be able to reap the benefits of depreciable plant and equipment assets. The funny thing about this is, I think the government has targeted residential properties for this and in reality, let’s face it, they’re really targeting Sydney and Melbourne because someone who’s owned a property in Perth isn’t jumping up and down saying, I’ve got all these depreciation benefits when their property has gone backwards, right?
So in my view it is a Sydney and Melbourne kind of focus tax driven budget measure. The interesting thing about that is, I mean look at what the RBA is saying, they’re more concerned or as concerned about the commercial property market. Some of the yields that people are buying commercial property on at the moment, are ridiculous, but they’ve let commercial properties continue the way they are. That’s possible because there’s a lot of big players in commercial and if you were to tell Lendlease, so when they buy a shopping centre, they can’t claim the air-conditioning in their shopping centre, that would be difficult.
Peter: So potentially commercial property, who knows in the future whether they’ll shift attention to that too?
Tyron Hyde: Who knows? Who knows?
Peter: All right, I hope that answered that question guys. All right, so we’ve got a question here, obviously a good one, from Mark. Mark’s asking, “Do these changes apply to all scenarios of ownership for residential property, for example, is it the same for owners whether they’re an individual owner, a joint owner, a company, a trust, a super fund?”
Tyron Hyde: Great question Marc, it’s something that I haven’t thought about, to be honest. It does. It clearly just says it’s residential, not the structure that you own it in, but it’s a really good question. I never thought about that, but the differentiation is not the entity that you own it in. The differentiation is that it’s residential property. So the answer is I don’t think it matters when you own in a trust fund or super fund, it’s clearly written that it applies to all residential properties, but a good question.
Peter: Yeah, I thought so too. All right, Jayni is asking, “When we talk about property purchased before Tuesday, May 9th, when these changes were announced, do we mean settlement date or contract exchanged?”
Tyron Hyde: Definitely contract exchanged. So if you bought that property prior to … if you exchanged that property, but you settled today, you’re okay. We had a client last week, ring us up in a panic saying, “I exchanged on the 9th of May. What kind of reporting can I do?” And we said, “Well, you’re going to have the old good report. You’ll be able to claim both plant and equipment and the building allowance, provided that you exchanged before 7:30 pm.”
Now most people do, but sometimes it does occur later, but we said, “As long as you’ve got some email correspondence from your lawyer that this occurred prior to 7:30 pm, which is when the cutoff hour is, you’d go into the older system and be fine.” So it’s definitely on exchange, not on settlement and on that note, if you entered into a building contract the same applies. It’s not from when handover is, it’s when you would’ve signed that building contract, so when you entered into that building contract would be the applicable time, not when the building was handed over to you.
Peter: Right, okay. Thanks for clearing that one up. Okay, we’ve got a question from David. David’s asking, “I bought my investment property three years ago and have never had a depreciation schedule prepared. Can I get one now, and how many years back can I claim?”
Tyron Hyde: Absolutely you can David. So you’re in that boat where I said before, that this is a golden opportunity for you. What we will do is we will based that report on when you settled on that property. You’ll get a report that says from us that you settled in 2014 and those deductions will start from that day. You can then amend … you know, you need to speak to your accountant about this, but … maybe not your accountant, but as far as we’re aware you can amend your tax returns for two years.
If you’re up to date, you can amend two years back. If you did your last tax return 2015, you can go back to 2013, but again we’re not accountants and you need to discuss that with your financial advisor, but that’s the advice we get from many different firms.
Peter: All right okay, great. We’re getting some really fantastic questions here. Vicky’s asking, and I think it must relate to one of the graphs you showed, the comparison chart. She’s saying, “Is there a reason that the pre budget side uses are diminishing value method and the post budget changes side use the prime cost?”
Tyron Hyde: Vicky, you get a Cutie doll, very clever question.
Peter: It’s a good one.
Tyron Hyde: The reason is that because in the post budget … so in the pre budget, the plant and equipment can be claimed by the diminishing value method and the prime cost method. Post budget, if all we’re talking about is the building allowance, you cannot claim the building allowance via the diminishing value method. It has to be claimed by the prime cost. So very impressed with that question and it wasn’t a typo. So pre budget you’ve got the allowances thereof 20k the first year for the brand new property.
Half of that would be prime cost, which would be the building allowance, the other half would be the diminishing value method, which would be the depreciation of the plant and equipment. Moving forward, if there’s no depreciation of the plant and equipment and it’s part of your CGT equation or part of the cost base, and all you claim is the building allowance, you don’t have a choice to claim the building allowance under the diminishing value method. All you can do is claim that under the prime cost method, so very good and well spotted Vicky.
Peter: And Ty, that’s because it’s at a set rate and therefore the same each year, isn’t that right?
Tyron Hyde: Correct. So the building allowance is a set rate of two and a half percent over a 40 year period, which is why it’s slower. It’s a fixed rate. As an example, if the structure of the building costs $200,000 today to build, you get to claim that at two and a half percent over a 40 year period. So each year is five grand, five grand, five grand, whereas the ovens and dishwashers all have varying rates of depreciation, all have varying rates of effective lives and so it’s a very different scenario and those plant and equipment items we can claim using the diminishing value method, or you can use the prime cost method on that. Complicated, I know, but well done Vicky.
Peter: Good question. Ty, Lisa is asking, “If we already own a unit and we renovate, say now, after the budget, are we entitled to claim any scrapping allowance? Any residual value and can we claim depreciation on the renovation, the new items we’ve purchased?”
Tyron Hyde: So Lisa owned that property … hi Lisa. You own that property prior to the budget, was it?
Peter: Correct, yeah.
Tyron Hyde: Yes you can. So the scrapping of the residual value, again, if you’ve bought the property prior to the budget, there’s no changes in what you can do in terms of removing items and your original claim is not altered. If you removed items from a property you already owned, you would still get a balancing adjustment of that, there’s no different here because those plant and equipment items do not form part of your cost [inaudible 00:41:57]. It’s a different CGT equation. Another example, say I bought a property prior to the budget, say I bought it in the year 2015 and I renovate that property today, the question there was also asked, “Can I claim the depreciation of the renovation if I bought it prior to it?”
The answer’s yes, the budget statement clearly says that if you bought a property prior to the budget and you then go and replace the oven and depreciation that oven, you can claim the depreciation of that oven. What it does also clearly say is that the purchaser after you cannot.
Tyron Hyde: And that’s were a little bit of confusion is in terms of where it words the subsequent investor. So it clearly says that a subsequent investor cannot claim the depreciation of the plant and equipment, which had let a lot of people to think that new property’s okay, but I’m not reading that way. To be honest, everyday I change my mind. I think, “Ah, they’re going to allow new. Ah, they’re not going to allow new.”
There’s lots of reasons why I could argue both reasons as to why they will they won’t and I can go on all night about that and the answer is, I don’t know.
Peter: It’s frustrating, but I guess we have to have a definitive answer and clarification from the Treasury office as of, what, the 1st of July.
Tyron Hyde: Absolutely. In reality, it should’ve occurred already. It should’ve occurred already, because right now people … as you know Peter, we produce reports for the developers and with say … and we’ve done this since the budget, we’ve said they want to know when they’re selling property, how much allowances they can show potential investors, they can in depreciation, right?
So there’s people out there right now, with marketers and developers saying, “Based upon our forecast and you can get a $15,000 depreciation deduction year one” and they can enter into that contract and then, in three weeks time, they’ll have to go back and say, “Sorry, it’s going to be $6000” and I think it’s quite shocking, quite frankly, that this uncertainty is in the marketplace.
Peter: Yeah, I agree. Very frustrating. Okay, another question if you’re happy to keep taking them. I’ve got one from Veronica. Veronica’s saying that she’s owned her property since well before the budget changes and it was her principal place of residence and now post budget changes, she’s going overseas for an extended period of time and the property will now become a rental. Will she be able to claim the depreciation on the plant and equipment items?
Tyron Hyde: Great question. As I said before, I will be hoping to answer all I could. I think you will be okay. I think that the legislation will look at when you actually acquired that plant and equipment and that was prior to the budget, so in theory it should be okay. I’m not going to bet my last dollar on that, but I think that would be okay. I think that anything prior to the budget, you’d still be under this grandfathering law and the law should still apply to you. It’s a good question, but I think you should be okay.
Peter: Yeah, so I guess Ty, the take away from that is where we think that it will be relevant to when you purchased the property as opposes to when it became an income generating asset.
Tyron Hyde: Correct. Absolutely right. Far better word than me, Peter.
Peter: Well, I’ve had time to think about it. You’ve been speaking. All right. We’ve got a question here. Let’s take this one from Allan. Allan’s asking, “How does all of this affect negative gearing?”
Tyron Hyde: Wow, okay. Good question. So if you ask me, okay, let’s think about negative gearing. So what most people know about negative gearing is that you can claim the losses of the property against your taxable income where there is a loss. Now the interesting thing about this is that, in the current interest rate environment, up until two years ago, most people were getting a 5% yield on properties and as rates have come done to three and a half percent or 4%, well, there’s actually not a lot of negative gearing in terms of what the outlays of your mortgage are versus your rent until today.
I was at a seminar last week and the finance broker was saying they can still get 3.8% mortgage as long as you’ve got 20% equity in the investment property. So at 3.8% you’re getting rent, maybe not in Sydney, but in a lot of parts of the world because there are other places other than Sydney and Melbourne with who we’re getting 5%. Well, that’s not real negative gearing there, is there? In some ways I would say that what the government’s done, and it could be a brilliant political move, they have just sloshed negative gearing without telling anyone they’ve done it because the only thing that … if you look at what the deductions are for investment property owners.
There’s the mortgage, but there’s a lot of other things. So, when you’re reading the paper, “Property investors, they’re claiming $3 billion in negative gearing deductions.” If you actually drill into what the losses are, a lot of it relates to things like accounting, property management fees, rates, taxes. Now I can’t see a time where all those costs are not going to be deductible. That’s like saying when you buy a share that your brokerage fees are not deductible.
In reality, if rates are where they are and rents are where they are, the only thing that are pushing people into the negative gearing territory would be the depreciation of the property, because they’re never going to not let you, in my view, claim your property management fees or accounting fees. So as I said before, when the papers say, “There’s $3 billion in negative gearing losses” lots and lots of that relates to things that are not losses on your mortgage.
As part of that $3 billion figure, guess what one of them is? It’s land tax. So they’re saying that the losses of you paying tax on your investment property are part of the negative gearing equation. So in some ways I would argue that what the government has done, is squash negative gearing without telling anyone, because they said pre election they’re not going to stamp out negative gearing.
Clever. Clever in my mind I guess, but again I reiterate, I think the risk/reward ratio of what they’re trying to do, is far greater than what the reward they would have. I” just get off of my soapbox now Peter.
Peter: Ty, are you happy to take a few more questions that are still coming in?
Tyron Hyde: Absolutely.
Peter: All right. May have covered this before, but Yen is asking, “If I buy a new apartment, do I get the depreciation on the plant and equipment items, or does the developer?”
Tyron Hyde: No one knows, is the simple answer and that’s the big unknown. As I said, I change my mind on that all the time. Look, if the developer builds and develops the property, he’s gong to be able to claim the depreciation. If he then sells it to you as the purchaser, I would hope that you as a purchaser will be able to depreciate those plant and equipment items.
One of the reasons why I suspect that new property will not be able to depreciate as well, is because you could have the bizarre scenario where if someone buys a unit in a high rise block and owns it for two years and they can only claim that carpet for two years, that the next person who’s bought the same unit down the hallway, he owns it for five years.
He can claim the carpet for five years and there’s no other president in that scenario. That doesn’t occur in any other depreciable asset regime. It’s very unusual, so that tends me to think that they will say no new property cannot be claimed as well, but that’s why I think there’s to been a lot of thought in this because they probably went into this thinking that it’s only going to apply for secondhand properties, but then they thought about the mechanics of it, and thought, “How’re we going to do this?” and I’m waiting with bated breath to hear how they are.
Peter: Don’t know if they call that policy on the run, don’t they?
Tyron Hyde: I think they do. I think they do, and look, I think what’s happened is that the government had to be seen to be doing something against property investors. Rather than squashing negative gearing, this was their way of saying, “We’re trying to address housing affordability by limiting deductions on depreciation. We’re not saying there’s no negative gearing, but we’re going to do this” but I don’t think there’s been a lot of thought on the mechanics of it.
Peter: Well, time will tell.
Tyron Hyde: It will.
Peter: All right Ty, maybe one last question, and it’s a doozy I think. Leechen is asking, “If I buy a property built before 1987 today, there would be no building allowance to claim on. If the previous owners have conducted an extension of the building, am I able to claim on this?” And then second part to the question Ty, is, “How would I know if previous owners have done this?”
Tyron Hyde: So the first part of the question, it was an extension and it’s the building allowance component of it. Well, the laws haven’t changed in that regard. You can still claim the building allowance component of the extension regardless of these changes, because as I said before, the building allowance hasn’t been affected by that.
What might be affected is if there was carpet in that extension. That might be an issue, that would have to be worked out, but the structure of that renovation, there’s nothing changes because the building allowance component hasn’t changed.
Your second part of the question was, “How do we work that out?” You engage Washington Brown. That’s what we do. We go out to that property, because generally speaking, those costs are transferred over at settlement. So we go out to the property and we measure the areas and we look at what the structure is, we work out what the actual cost of the construction was.
Sometimes we don’t know when it occur, but we try to decipher when that renovation occurred and that’s what we write in your report saying … we say, “Well, the renovation occurred in 2000. The approximate cost was a $150,000 for that renovation” and the ATO, I will say generally accepts our view, but in 25 years they’ve never not backed one of our reports. So I’d say they do accept our view on that.
Peter: Yeah, right. And just to clarify there. You can start claiming the 40 years worth of depreciation available on those extensions from when we identify that they were put in.
Tyron Hyde: Correct. So if that extension occurred 10 years ago, Leechen would have 30 years, if he bought that now. Leechen, you have 30 years left of the claim left of the building allowance on that.
Peter: Even though there might only be 10 years left of claim on the original structure, for example.
Tyron Hyde: Well, there might be no claim on the original structure. So our report will say that there’s nothing on the original building, but the renovation of the property that occurred 10 years ago, you have 30 years left to claim that now. The new budget laws or budget proposal doesn’t affect that at all.
What might be affected, is the carpet within that renovation. This is where it’s all getting very, very interesting.
Peter: Well, I guess that’s a good segue to say stay tuned for the next web event when we get a little more clarification. We’ll certainly be wanting to share that with you all again.
Tyron Hyde: Well, that’s right. I think the amount of people that have come tonight and today, I think we’re definitely going to do an update of what’s actually occurred and look at other news of how we look at what people might do in the future shall we say.
Peter: Yep. Great. Well look, as Ty mentioned, again the attendance was fantastic tonight and you’ve all stayed online till the very end. I hope it was valuable. Once again, watch out for that email from us tomorrow, containing the link to request a quote and receive that exclusive discount and just to mention finally, if you have any questions about your specific scenario and depreciation, hopefully you can tell from tonight that we’re pretty passionate and a little bit nerdy about this stuff and we really love talking about it.
So if you do have any questions, please feel free to get in touch. One of our sales team would be happy to talk about your specific circumstances.
Tyron Hyde: And just finally, thanks for coming. It’s an interesting time that we’re all entering into. I’m going to keep … hopefully our clients and others abreast of these changes because it’s certainly is, in my 25 years of being at Washington Brown, in my view the most significant change that we as property investors are going to face.
Peter: All right, well once again thank you everyone for joining us and we look forward to being in touch soon. Have a good evening.
Every investor – whether expert or amateur – should be looking for the same things in a property investment to ensure its success.
While there is no exact formula for buying a successful investment, it’s handy to have a checklist to consult to make sure you’re on the right track.
Below are some of the fundamentals you should be looking for when buying. Be aware that this isn’t an exhaustive checklist. However, it can serve as property investment tips that will help guide your decisions.
Property must haves:
Good location – The old adage still rings true; it’s all about location, location, location. Well, maybe it’s not all about location, but the fact is you can change a property, but you can’t change a location. Being close to amenities such as shops, schools, public transport and even major transport routes is key when it comes to selecting a good investment property.
Growth drivers – Are there any major projects taking place in close proximity to drive up the value of the property? This might be in the form of new or planned infrastructure or commercial developments that will improve amenity or access to the area. This is likely to draw more people to the area, pushing up demand for homes.
Population growth – Are people moving to the area? Look at population growth figures in the area you’re buying in. Then determine whether there are factors drawing people in, such as employment nearby and improved amenity.
Tenant appeal – Is there demand from renters in the area and for the type of property you’re purchasing? Does your property have the features tenants want? What are the vacancy rates? Demand from your target demographic is the key to securing a strong return.
Build quality – While location is key, the property you buy is important too. This is especially true if you want to attract quality tenants. Do your due diligence, which includes getting a building and pest inspection, to ensure the home you’re buying is of a good quality.
Value-adding potential – A well-selected property should see capital growth. However, it’s always a good idea to have the ability to add value through a renovation or by adding a room or a car park, for example. Value-adding potential also comes in the form of a change in zoning that will allow for development. If the market slows you may need to manufacture growth to increase your equity.
Liveability – Does the property have a good layout? Does it have the features people want, such as extra bathrooms, car spaces, security, and a nice outdoor area, whether it be a roomy balcony or a good deck and backyard? All of these things will make it more sought after. Liveability also goes for the suburb. Ensure you buy in an area with a good community due to plenty of amenity and nice aesthetics.
Individuality – A property that is unique is some way – or that stands out from the crowd – can experience strong growth as it will be in high demand amongst buyers. This is especially the case when it comes to units, particularly in areas with a lot of supply.
Scarcity – Does demand outweigh supply in the area in which you’re buying? This applies to the area in general as well as the property type. If there is greater demand than supply in terms of both buyers and renters, the property value and rental rate will be pushed up.
Low maintenance – Select a property that won’t require a great deal of maintenance. This will save you money and keep your tenants happy.
Proximity to employment – People like to live in close proximity to work, so make sure there are employment options nearby. If you’re buying in a regional area make sure there’s more than one industry in the town.
Stability – Have property prices been stable in the area in which you’re buying? Ideally you want a history of consistent growth, avoiding areas that have experienced big price falls.
A solid history – Do your research and make sure the property hasn’t been sitting on the market for a long time, and if it has, determine why. Make sure it’s not due to an inherent problem with the property. Finding out why the sellers are moving on is also important. The last thing you want is a property that isn’t selling for a good reason.
The right numbers – You want the property to stack up from an investment perspective, with good potential for capital growth and decent rental yields. Make sure the numbers add up! What is the rental yield, what are the total costs, how much will you be out of pocket for?
What depreciation can I claim on my rental property?
Just like you claim wear-and-tear on a car purchased for income-producing purposes, you can also claim the depreciation of your investment property over time against your taxable income.
There are two types of allowances available: depreciation on Plant and Equipment, and depreciation on Building Allowance.
Some Plant and Equipment items include; ovens, dishwashers, carpet, blinds, lifts & light fittings. These items tend to be more easily removed and have a shorter life span.
(UPDATE: Deductions for plant and equipment items may only apply to commercial properties, brand new properties, if you bought the property prior to May 9, 2017, or some other exceptions – Read about the Budget changes here).
Building Allowance items tend to include; bricks, concrete, tiles, windows, doors & steel.
These items are more permanently fixed into place and have a life-span, according to the ATO, of 40 years from the time they were fixed into place.
In terms of depreciation the ATO has identified 3 main problem areas:
Incorrectly claiming the building/developers profit as a deduction. You can only claim the builders profit where you engage a builder directly to build your house. You cannot claim the development profit a speculative builder has made as a building/construction cost.
Assuming you can claim the 2.5% building allowance based upon the purchase price. This is where you need a Quantity Surveyor to estimate the construction costs. The building allowance deduction must be based upon the original construction cost.
Getting your accountant to prepare the depreciation schedule. Accountants & real estate agents are not allowed to estimate constructions costs. Quantity Surveyors like Washington Brown have been identified in Tax Ruling TR 97/25 as appropriately qualified to estimate the construction costs where the costs are unknown.
There are very few occasions where claiming depreciation is not worth it. The only time I would suggest is if you have purchased a property that was built prior to 1985 and have owned it for 5 years and now want to start claiming depreciation.
In this case, the depreciation benefit may have already been used up and you have left your run too late.
So the moral too the story is… if it’s an investment property of any age or purchase price – get a Quantity Surveyor’s report immediately after settlement – and it will always be a worthwhile exercise.
Your Questions on A Rental Property Depreciation Calculator Answered!
Depreciation is not the foremost thing on the mind of most investors at the initial stage of acquiring a property. Usually, the consideration for this benefit starts to set in only after the purchase which may be less advantageous compared to when it is thought of before decisions are made to buy a property.
Knowing how much you would probably gain in tax depreciation for a prospective property could give you big savings and ROI. This knowledge, which is the “missing piece” of the property investment puzzle, could influence your decision whether a property could make or break your investment. But how can we come up with an estimate? Do we need to stay up all night crunching up numbers so tediously? Do we need to pay someone just to come up with these figures?
The good news is no. Because of Washington Brown’s innovative and advanced solutions, property investors like you can now get an instant and free estimate of the tax depreciation deductions that a potential property would give you. And this is possible with our Rental Property Depreciation Calculator, which is a first in our country to determine a reliable and accurate estimation based on real properties from our extensive database. Two years in progress have continuously proven the originality and advancement of this tool that a patent application is underway for the concept!
We know you have a few questions in mind regarding this so here are our answers. Is this 100% accurate?
No two properties are the same which logically means that no result can be 100% accurate which is understandable. Despite that, this calculator provides the best information you can get out there as it is computed based on up to date information that we have access to regarding properties we have inspected. Aside from that, we have worked out a “barometer” that measures a result’s degree of accuracy. All results are also rounded off to the nearest thousand.
Is there no limitation to the type of property that can be assessed by this calculator?
While our tax depreciation calculator caters to a wide range of property types, it excludes properties that have been renovated or are fully furnished. With many additional items to consider for these properties, we believe the results would most probably skew and complicated.
Can I feature this calculator as a tool in my website?
We would be glad to receive a written request for this through our email email@example.com so that we can take a look on your site and consider its suitability.
Can I base my tax return information on this estimate?
Unfortunately, the Australian Taxation Office and the Australian Institute of Quantity Surveyors require that properties must be evaluated by a quantity surveyor individually for actual data to be indicated in the tax return. This is to ensure that a thorough assessment of capital works and a detailed breakdown of your property’s plant and equipment are obtained.
I clicked on the “Calculate” button and nothing happens. What does this mean?
This would be the case if the calculator could not find similar properties to base estimation upon. Fortunately, you can still get a verbal estimate by contacting us, or even better, we can give you the actual report on your property already. Apply for a quote here
I believe the numbers don’t add up. What should I do?
While we have put in our best efforts to achieve accuracy, isolated cases of discrepancies cannot be avoided in the process of too much cross-referencing of information. We are happy though, to attend to your concern immediately as we receive your email at firstname.lastname@example.org.
What is represented by the “years” column?
Every year represents an entire financial year. The estimate you will get pertains to the allowances you are eligible for if you were to settle on that property at the time of the calculation. As an example, the Year 1 points to the amount that you can claim over the coming 365 days if the property your purchased is similar to the data that you have keyed in. Return To Rental Property Depreciation Calculator
What is meant by the Diminishing Value and Prime Cost Methods?
These are both methods of depreciating plant and equipment items as per the guidelines of the Australian Taxation Office. The Diminishing Value method is where the allowances accelerate in the first few years while the Prime Cost method on the other hand spreads out the allowances evenly over a period of time. Return to Tax Depreciation Calculator
How can I tell the age of a property?
By knowing the year when the property was built, you can get the years of existence of a certain property. Without that information, you can find assistance from your relevant local council. Return to Tax Depreciation Calculator
How do you classify the property types?
Below is a list of our definition of the various types of property:
House: Freestanding property for residence
Townhouse: Residential properties that are attached by way of common walls, forming 3 or more residences. Most townhouses share common external grounds as well as service connections.
Villa: Standalone residential property on a lot but with other detached houses. Service connections and external grounds are mostly common to all villas in the same lot site.
Unit Low Rise: A 3 or more levelled complex for residential use with access shared between the dwellings. The accesses are mostly walk-up. High end developments use lifts for access.
Unit mid Rise: 7 levels or more of a residential complex where access is common with at least one lift service. Usually, developments utilise basement car-parking.
Unit High Rise: Residential complex with more than 7 floors and equipped with 2 or more lifts and fire services as well. Common access and basement car-parking is also a usual characteristic.
Commercial: An office complex with basic floor finishes and services, open for prospective commercial tenants to retrofit and furnish
Industrial: Some provisions include basic services, lighting, and fire protection. Services with higher quality may incur additional expenses due to additional electrical work needed. These structures often look like a warehouses and factory complexes.
4.9 Stars - Based on 179 User Reviews
Very professional and very easy to deal with. Great turn around time and your kept up to date with the progress along the way. Also tax compliant. Fantastic company
Detailed depreciation report which maximises our tax offsets. It is definitely a must to have Washington Brown do a depreciation report for all your investment properties. You never know how...read moreDetailed depreciation report which maximises our tax offsets. It is definitely a must to have Washington Brown do a depreciation report for all your investment properties. You never know how much money you can recoup from depreciation until you’ve got a Washington Brown depreciation schedule. It is an absolutely amazing wealth creation strategy.read less
It has been wonderful experienced with Washington Brown. Depreciation schedule has been prepared and ready in timely manner right after requested information has been provided. Now my investment property is...read moreIt has been wonderful experienced with Washington Brown. Depreciation schedule has been prepared and ready in timely manner right after requested information has been provided. Now my investment property is ready for Tax depreciation. Thanks for professional service.read less
Dealing with Washington Brown has been a breeze. I'd originally inquired if there were depreciation benefits for a property and after providing some additional feedback, I got a positive response...read moreDealing with Washington Brown has been a breeze. I'd originally inquired if there were depreciation benefits for a property and after providing some additional feedback, I got a positive response that there were benefits available to be claimed and so I engaged them to produce a depreciation report.
Handled completely online, I was presented with a very simple process and the tracker allows one to know where things have progressed through each of the stages. They were able to engage with my property manager and have the inspection scheduled and the report completed, before being emailed to me. A professional and easy to use detailed report, Washington Brown have done an excellent job and were a pleasure to deal with.read less