What is Property Depreciation?
Property depreciation is a legal tax deduction related to the ‘wear and tear’ of an investment property over time. A tax depreciation report (or 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 your family.
How does a Depreciation Schedule help me?
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’ in to the purchase price of the property.
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What are the 2017 Federal Budget changes to depreciation?
The announcement made in the 2017 Federal Budget limits depreciation deductions on second- hand residential property. It stipulates that owners of such properties are ineligible to claim deductions on the “previously used” plant and equipment items.
The good news is that investors are still able to claim the building allowance (deductions on the structure itself) on second-hand residential property built after 1987.
The great news is that brand new and non-residential (i.e. commercial, retail, industrial) property are all exempt from these changes. In these cases, investors are able to claim both the building allowance and the plant and equipment deductions.
Why should I choose Washington Brown to prepare my Depreciation Report?
Here are seven great reasons to choose Washington Brown:
- We are the property depreciation experts and have been recognised as industry leaders for 40 years
- We guarantee the maximum allowable depreciation deductions, every time
- We break down your building allowance into separate items, which means thousands of dollars in extra deductions if you renovate
- Washington Brown is a multi-award winner and we are trusted by the industry’s largest entities including the Westpac Banking Corporation, Realestate.com and Lend Lease
- Our depreciation schedules span up to 40 years, compared with as little as five from some competitors
- 14 Day Turnaround Guarantee – If we cannot complete your Tax Depreciation report in the 14 days following the day of the property inspection and from when all requested additional information is received by us, whichever occurs later , we’ll supply the report for HALF the accepted quoted price
- Upside Only Guarantee – For properties built after 1987, if we don’t achieve twice our fee in deductions within the first 12 months of settlement, there is no charge.
How much will I save?
Each property is different and many factors must be considered when preparing a property depreciation schedule. Use the Washington Brown Depreciation Calculator to produce a good indication of potential deductions.
How much will my Property Depreciation Report cost me?
The cost of preparing a tax depreciation schedule varies according to the type, location and size of your property. However, for properties built after 1987, Washington Brown guarantees twice our fee in deductions within the first 12 months after settlement or there is no charge. In other words, you double your money or you pay nothing – There is zero risk. Furthermore, the depreciation schedule fees are 100% tax deductible.
How accurate are your Depreciation Reports?
Washington Brown has 40 years experience in the industry. As trusted appointees of major banks like the Westpac Banking corporation, Suncorp and St. George, we have access to real historical construction cost and planning data only panel members can obtain. In addition, our digitally powered quality assurance process – the TAXMAX500™ − evaluates every property across over 500 variables, and is constantly updated as Australian Taxation Office (ATO) policies change. That guarantees you maximum returns.
Does Washington Brown offer a guarantee?
We are so confident about the quality of our depreciation schedules that, for properties built after 1987, we guarantee twice our fee in deductions within the first 12 months after settlement or there is no charge. In other words, you double your money or you pay nothing.
Will you need to inspect my property?
Generally site inspections are necessary to ensure we include every depreciable asset and gather all the information we need to calculate an accurate construction cost. We’ll ensure that all depreciable items are noted and photographed for deductions and also as evidence in the event of an audit.
In some cases, i.e. when you’ve built the property yourself or Washington Brown has been involved with the development – we may be able to complete the report without an inspection.
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How long will it take to complete my schedule?
We pride ourselves on our efficient and friendly customer service. With offices all around Australia, we endeavour to complete your report within an industry-leading one week of the appointment taking place. We also have a 7 Day Turnaround Guarantee − Once the inspection is complete and all required information received, we promise you a depreciation report on your Australian Residential property within 7 business days or we’ll reduce the fee by 50%.
Is my property too old to claim depreciation?
If your residential property was built or renovated after September 16, 1987 you will be able to claim the Building Allowance on the property. Generally this element alone will provide you with thousands of dollars in deduction
As you purchased your property after the 2017 Federal Budget, you’re unlikely to be eligible to claim on the Plant and Equipment (i.e. carpet, blinds, ovens, etc.) within the property. Meaning if your property was built before 1987, not renovated, and purchased after May 9, 2017, it may not have any eligible depreciation claims.
Commercial and industrial properties are still eligible to claim on plant and equipment, so will most likely be worthwhile. The cut off date for building allowance on these properties varies. Contact us for more information.
Can I still claim on a renovated property?
Yes and it is useful to know how much you spent on renovations. If the renovations were completed by a previous owner, you are STILL entitled to claim depreciation. In either case, where the cost of renovation is unknown, we are fully qualified to make that estimation.
I bought my property three years ago. Can I still claim?
Yes you can. Your accountant can amend up to two years’ previous tax returns. There are some exceptions so please contact your tax agent or the Australian Taxation Office (ATO) for clarification. After you speak with your tax professional, you’ll need a depreciation schedule quote from us to get started.
Shouldn’t my accountant prepare this report?
The Australian Taxation Office (ATO) has stipulated that if a property was built after 1985 and the costs are unknown, only Quantity Surveyors are properly qualified to make the appropriate estimate of the construction costs.
Accountants, real estate agents, property managers, accountants and valuers are not allowed to make this estimate.
Call today to schedule an appointment with one of our expert quantity surveyors!
How will I receive my report?
We will email you a copy of the report and also send it to your accountant if requested.
Can I claim depreciation on an overseas property?
If you are an Australian tax payer, you can claim depreciation on any property no matter where it is located.
Washington Brown is the only property depreciation consultancy firm in this country with an international network, making us the number one choice for Australians with investment properties overseas.
Having worked across 22 countries on five continents (and growing), we are uniquely positioned to provide a cost-efficient solution to ensuring the maximum returns on your overseas investments under Australian Taxation legislation.
What are the main differences between Commercial and Residential property claims?
The main differences include:
- You can occupy the building and still claim depreciation
- Older buildings still qualify for the building allowance
- Claimable items vary by industry as do their effective lives
- Deductions are still allowable on previously-used plant and equipment.
Still have questions? Contact one of Washington Brown’s depreciation experts today.
Is it necessary to do a report every year?
No, a Washington Brown depreciation schedule is valid for 40 years (the lifetime of the building). We recommend that you do update the report if you do any renovations, repairs or need to replace internal items.
Why can’t I do my own Depreciation Report?
If you try to estimate your own depreciation, or use a provider without the professional quantity surveying qualifications, you risk submitting an incomplete or poor depreciation report which will cost you a lot in missed deductions. You might also face an Australian Taxation Office (ATO) audit if the report is deemed not up to the standards required. The laws have changed frequently over the years and each building is unique, so it pays to get expert advice.
Does Washington Brown do depreciation on commercial properties?
Washington Brown provides professional depreciation advice and reports for buyers, owners and sellers of commercial property as well for commercial tenants. Our commercial property clients range from individual investors, institutional investors, super funds and private companies.
We have a specialist commercial property depreciation team, solely dedicated to servicing the needs of commercial property investors.
Our commercial depreciation team have experience in a wide range of commercial property across the following categories:
- Industrial Warehouses
- Retail / Shopping Centres
- Commercial Office Space.
Still have questions? Talk to Washington Brown to help solve your Property Depreciation queries.