What is a Depreciation Schedule?

What is a depreciation schedule?

Property depreciation is a legal tax deduction related to the ‘wear and tear’ of an investment property over time. A tax depreciation schedule outlines the deductions you may be entitled to claim each year of ownership on the Building Allowance (the structure itself including bricks, concrete, etc.) and, if eligible, on the Plant and Equipment items (internal items like ovens, carpets, blinds, etc).  

As with any tax deduction, claiming property depreciation reduces your taxable income. That means more money in your pocket to reinvest or to spend on yourself or on your family.

A depreciation schedule from Washington Brown is a fully-comprehensive, ATO-compliant report that helps you pay less in tax. The amount the depreciation schedule says you can claim effectively reduces your taxable income because it’s taking into account how much it costs you to own and maintain the property.

While you may be used to claiming on such items as council rates or property management fees where you have paid money towards an item or service, depreciation is a “non-cash deduction.” This is because it’s the ONLY deduction that you don’t have to pay for on an ongoing basis – its already ‘built’ into the purchase price of the property.

If you’ve purchased an investment property, request a free quote for a fully comprehensive, ATO-compliant depreciation schedule today and save.

The CGT Saver Report

   

Let me introduce you to our new product, the CGT Saver™ Report – A report specifically created to prevent our clients from paying too much in Capital Gains Tax.

Although you can no longer claim depreciation on second-hand Plant & Equipment Items (ovens, dishwashers, etc.), with Washington Brown’s CGT Saver™, you can claim the applicable and documented value as a capital loss if you remove or replace any of these in the future.

This report lists and values all those included items that you have purchased at settlement. It then allows you to claim a capital loss straight away if any of these items are removed.

The best bit.. This loss can offset other share &/or property gains that you might make.

This report is exclusive to Washington Brown, so ask for it by name and contact us to find out more.

If you have purchased an investment property after May 9, 2017 – request a free quote here and one of our tax depreciation specialists will review your property and let you know if a depreciation schedule is worthwhile for you.

Take advantage of our ‘Double The Fee Guarantee’!

Will the Sydney Property Market Crash?

Sydney property market

I can think of many reasons why the Sydney property market is set for a major correction and I can think of many reasons why it won’t.

I guarantee you I could find five experts to argue that the Sydney property market won’t crash, and I could find five experts to reason why it will.

But I’m going to tell you my number 1 reason why the Sydney property market won’t crash. Wait for it. Drum roll, please…

The number one reason the Sydney Property market won’t crash is….

Depreciation Calculator

IT’S TOO BLOODY OBVIOUS.

You see, you don’t see market crashes coming. And every day at the moment I can find an article predicting the end is nigh.

How many of you sold all your stocks just before the GFC? In hindsight, it was pretty obvious that was coming. Seen the movie the Big Short?

Any of you sell all your tech stocks before the crash? Remember the Asian economic crisis in 1997…did you see that coming?

Well, I didn’t.

At the moment it’s TOO obvious to predict a Sydney market crash, every other day the AFR is warning that an oversupply of apartments is coming.

Buying Off Market Property in Australia

buying off market property

Shhhh…Off Market is the New Black

Shhh… Off-Market is the New Black!

Recently we re-entered the property market looking to upgrade from our unit in Bondi to a house.

We’ve been looking for a house around the Bondi area and I must say I am surprised that realestate.com.au and domain.com.au are still in business.

You see, everything that looks half interesting at the moment is being promoted as an “off-market” transaction.

Here’s what I’m thinking

If I receive an email from an agent where I’m part of a big group database and I’ve received it as a BCC – it’s pretty much ON the market.

Depreciation Calculator
If the agent has signed an agreement with the vendor to sell the property, it’s ON the market.

The other day I even received an email from an agent in Queensland trying to sell units off-the-plan on the basis they were Off Market.

Puh-Lease!!

So I queried an agent the other day, as nicely as I could, asking how it can be “off market” when the I’m receiving a group email promoting the property.

The answer was that the vendor didn’t want loads of people inspecting his house in Bondi.

Double Puh-Lease!

“Oh nooooo I’m selling a house in Bondi please don’t let all those pesky buyers come to my house and drive my price up”

Yeah Ok.

Now before every real estate agent gets stuck into me….I’m sure there are legitimate “off market” deals…BUT I think the term is becoming about as overused as a waiter saying “enjoy” every time they bring me my food!

I suspect the real estate agents saw that buyers agents were making money using this term and thought “we can do that too”.

So they go to there database with an “off market” email, create interest – then put it up on realestate.com.au and hey presto… Boom!!

Suddenly the vendor doesn’t mind those pesky purchasers, they are even leaving the scent of coffee or perhaps some incense wafting through the house just before the open.

So, buyers beware… “Off Market” is the new black.

Buying an Investment Property?

Buying an Investment Property?

Where should you buy property in 2016?

AFTER a few years of strong growth Australia’s property market appears to be cooling.

But this doesn’t mean investors should shy away from buying; in fact, it’s just the opposite.

It’s an opportune time to buy due to slower price growth and a record low cash rate, and while the overall market is experiencing a slowdown, there are always with growth potential to be found.

Where are they? Let’s first take a look at what’s happened over the past year before gazing into the crystal ball.

The current state of play

Property prices grew by 7.8% over 2015, with Sydney and Melbourne leading the charge, according to CoreLogic RP Data figures.

Depreciation Calculator

Sydney values were up by 11.5% at the end of the year, while Melbourne values were up 11.2%, despite both seeing a slight drop in values over the last quarter.

While Sydney was the standout performer at the start of last year, Melbourne has now started to take over.

In the first month of 2016, Victoria’s capital saw growth of 2.5% compared to 0.5% in Sydney, and the performance difference between the two over the past six months has been significant, with Sydney seeing a 0.6% drop in values and Melbourne seeing a 3% rise.

Outside these perennial favourites, over 2015, there was little growth in other capital cities.

Brisbane and Canberra saw a moderate increase of 4.1% in property values, while the other capitals all had fallen. Perth and Darwin experienced the biggest declines of 3.7% and 3.6% respectively.

What’s in store for 2016?

Many experts believe the property market is likely to be slower this year, with subdued growth and lower rental returns.

Affordability will be a factor hampering growth in some markets, particularly Sydney and Melbourne, where the median dwelling price is now $776,000 and $595,000 respectively, according to CoreLogic RP Data.

Another factor impacting demand is the regulatory crackdown in the mortgage market, which occurred in 2015 and has led to higher interest rates, particularly for investors, who have since scaled down their activity.

Despite expectations of softer conditions this year, dwelling values did experience a small rise of 0.9% in January, according to the CoreLogic RP Data Hedonic Home Value Index, which could be an indicator they won’t fall.

In any case, we know that the property market is never a ‘one size fits all’ and with so many submarkets there are always areas experiencing growth.

Investors need to start by looking at a state level before drilling down to individual suburbs and then even further into pockets within those suburbs.

Which states will shine?

While Sydney and Melbourne have come off the boil, their strong economies are expected to see property price growth level out rather than fall this year.

Depreciation Quote Schedule

Other states are due for some stronger growth, however, and the one coming up on everyone’s radar is Queensland.

The south-east corner of the state is the area many are picking for growth over the coming three to five years.

Growth in South East Queensland over the past two years has been slow and steady, and predictions are that this will continue.

Interstate investors are being drawn to the area largely due to its affordability and higher rental yields.

Not only are prices in Brisbane around 40% cheaper than those in Sydney, with the city having a median dwelling price of $478,200, but property is also substantially cheaper than in Canberra, Darwin and Perth, which have median dwelling prices of $587,500, $520,000 and $515,000 respectively, according to CoreLogic RP Data.

The Perth and Darwin markets aren’t expected to experience growth in the short to medium term – and in fact, may experience further falls – but this means there may be some good buying opportunities at the moment for those looking at the long term.

Adelaide and Hobart have been ticking along steadily and the affordability of these areas means there are opportunities for investors looking in the right areas.

Hobart, which has the most affordable median dwelling price of all the capitals, some 20% lower than Adelaide, is already showing signs of growth with a significant 4.7% rise in dwelling values over January alone.

Canberra also experienced growth over the first month of this year with a 2.8% rise in dwelling values.

While experts warn the latter two markets are more prone to ups and downs, there are opportunities for investors, particularly for those looking for higher rental returns, with Hobart having the highest yield of all the capital cities at 5.4%.

Calculate It! How Much Can You Save?

How to calculate property depreciation

Calculate It!

When I was on stage giving a seminar about Property Depreciation, I always have a Question & Answer session at the end.

In the talk… I discuss our Property Depreciation Calculator and how it helps property investors make informed decisions about the type of rental property they want to buy.

Then this guy up the back puts his hand up the back and says

What’s so special about your Property Depreciation Calculator?

“Well”, I say, “Let me tell you…”

“I’m pretty proud of our property depreciation calculator, it took me 4 years to build and is the only one of its kind. In fact, it’s the only property depreciation calculator that lets you work out the depreciation of a property based upon a proposed purchase price.” Depreciation Calculator

“You see, I believe you can’t really work out the depreciation of a property by entering an area – and, let’s face it, how many of us know the internal unit area of our property. Do we include balconies, garages, common areas etc…You see that’s why I think the other calculators on the market that use an area are flawed.”

I’m pretty excited by now, and I go on…”I’ve got to be honest…when I started creating this property depreciation calculator, well, I had more hair!! It was a long an arduous task.”

“You see, I think no two houses are the same, and that basing the depreciation of a property on it’s area is flawed. So I wanted to create a property depreciation calculator where people could enter a proposed purchase price and easily get a result.”

“Now, in order to do that we needed to come up with a way where the calculator would grab lots of like type properties add them up and average them out.”

“That’s why it took 4 years to build, we needed enough data in the calculator to make it a calculator that property investors could use. And today, I’m proud to say, day in – day out…it’s the most used part of our website.”

“We’ve actually got a patent pending on it…again why I’m proud.”

If you need a depreciation schedule for your investment property – get a quote here or work out how much you can save using our free calculator.

Who is Liable for Depreciation?

Who is Liable for Depreciation?

So, who is liable for depreciation?

We were recently asked by a client “Do you take responsibility for your reports?” and I wanted to share our response regarding who is actually liable for depreciation once the reports have been sent out to the clients.

To prepare a Tax Depreciation Report, we require clients to supply cost information pertaining to the construction or improvements of their property where this information is known.

But, of course, we cannot take responsibility if a client provides us with false or fraudulent information.

Depreciation Quote Schedule

I can happily confirm that we, Washington Brown, fully stand by our reports and estimates in the event of a client audit. We proudly take 100% responsibility for the estimated figures applied in the Tax Depreciation Schedules we produce for our clients.

Washington Brown has Professional Indemnity Insurance of $10,000,000. This far exceeds minimum requirements and the cover of other firms in our industry. Adding to this peace-of-mind is the fact that over the last 23 years, we have not once had our figures refused by the ATO.

That’s pretty cool if you ask me.

The ATO is Wrong & we are going to Prove It!

ATO is Wrong<

Why the ATO is wrong

The other night in bed….I was reading an article on the ATO Website (yes I’m a bit weird), titled “Where do you get the construction cost information?”.

I was a little shocked when I read the last paragraph that stated “Note: Remember to obtain your construction costs report as soon as possible as these reports can take a long time to prepare.”

At first I thought, wow even the ATO recognises that it’s not always that easy and fast to: Depreciation Calculator

  1. Get all the information required to prepare a report (Including any work carried out by the vendor or previous vendor if handed over at settlement
  2. Liaise with the tenant and property manager to get access
  3. Inspect the property
  4. Compile the data
  5. Prepare the actual depreciation schedule

The other issue is that Quantity Surveyors get inundated around June and then are quieter from November to February.

So, Washington Brown is committed to proving the ATO is wrong and here’s how.

We have a 7 day guarantee!

This means: after we have received all of the required information AND completed the inspection for the property we will have your report completed within 7 days!

The key here is do it now! – You’ll get your report within 7 days guaranteed if you order your report here now!

Why do I need a Quantity Surveyor

why do I need a quantity surveyor

Builders are good at building. But that doesn’t necessarily make them good at maximising the depreciation allowances you, the developer or investor, are entitled to.

That’s why if you have contracted a builder to construct your investment property it still pays to have a quantity surveyor prepare a depreciation report for you.

In my two decades of being a quantity surveyor, I’ve never seen a builder’s depreciation schedule that I could not improve upon and therefore significantly increase the claim for the investor.

Some of the common mistakes I see in builder-prepared depreciation schedules are:

By far the worst mistake is the last one. And this can cost you significantly.

(NOTE: Deductions for plant and equipment items may only apply if you bought the property prior to May 9, 2017 – Read about the Budget changes here)

Let me give you an example. You see, when a builder buys an oven for $800, that’s not what you pay for it. By the time the investor pays for this item, a range of other fees would have been included,
such as the architect’s design, transportation, installation and supervision. Next thing you know the real cost of this oven to you is $1,100, and it’s the real cost we’re after, not what the builder paid. Depreciation Calculator

Now, that extra $300 on the oven depreciates at 20% per annum, rather than at the 2.5% building allowance rate. This means you can claim the depreciation much faster.

So at the end of the day, let builders build and let quantity surveyors save you money.

Work out how much you save using our free property depreciation calculator or make it happen and get an obligation free quote for a depreciation schedule now.

This blog is an extract from CLAIM IT! – grab your copy now!

You need to use an Experienced Quantity Surveyor

Use an Experienced Quantity Surveyor

I’ve already touched on this, but let’s put this issue in perspective. You have just paid hundreds of thousands of dollars for a property. Do you really want to save a couple of hundred tax-deductible dollars on the only tax break available to you that can be open to interpretation and skill?

The laws have changed frequently over the years and each building is unique, so it pays to get expert advice. Depreciation Calculator

I suggest you engage a firm that has been around for at least 10 years. They will have the necessary experience to analyse your property correctly. Don’t fall into the trap of assuming that anyone involved in the project can accurately estimate the construction costs.

At Washington Brown, we are experts at estimating construction costs. That’s what we do on a daily basis, whether it is for a property developer, a property financier or a builder. Your report will be prepared by an experienced quantity surveyor, ensuring you get maximum value.

Work out how much you save using our free property depreciation calculator or make it happen and get an obligation free quote for a depreciation schedule now.

This blog is an extract from CLAIM IT! – grab your copy now!