Tax Depreciation Schedules For Rental Property
Not understanding the importance and positive outcomes of a QS carrying out the report. Back to topThere are little things that can make a big difference to your deductions. For example we start your report from the settlement date, (other companies) do a generic full year so you are pro-rating items under $300 and Low pooled items by how long you own them. This is incorrect and the items should be claimed at 100% and 18.75% whether you own them for 1 day or 365 days of the 1st year.
Worried your proceeding with a report that might not be worthwhile? Back to topThe initial stage of the report process involves our team looking over the information received and reviewing whether or not it’s worth your while. Of course we are a business and can do the report for you, but our mission is to provide our clients with a good return on their investment and be satisfied with the result and if it’s not worthwhile for you, it’s not worthwhile for us. Our guarantee to you is if we don’t save you twice our fee in the first year, your report will be FREE.
Information on the rental property too hard to get your hands on? Back to topThat’s fine! Provide the information that is available to you and leave the rest for the expertise of our customer service team and qualified QS to find the information for you e.g. RP data. Any uncertainties, one of our Quantity Surveyors will personally discuss with you.
Why does your rental property need to be inspected? Back to topThe Australian Institute of Quantity Surveyors (AIQS) Code of Practice stipulates that site inspections are necessary to satisfy ATO requirements. The only exceptions to us not inspecting is if the property is brand new, in which we have the house plans, schedule of finishes and summary of costs or partnership with the developer i.e. Meriton
Why can’t a QS estimate renovation work if the costs are known? Back to topIt is an ATO requirement that if the costs ARE KNOWN then the information must be provided. In the case where you cannot provide the information (as we know everyone’s situation is different), we ask you provide the renovations details best to your knowledge.
Washington Brown seems too expensive compared to cheaper companies Back to topHave you ever thought to think why these companies are cheaper? In a sense, it’s like using the cheapest builder, or the cheapest accountant. We send out qualified staff and try and get you every legitimate deduction you are entitled to. We are ATO compliant and in the short term you might be saving a few hundred dollars though in the long term you could be missing out on thousands of dollars which YOU are entitled to, simply because we are good at what we do.
My Rental Property is really old – how can there still be depreciation left to claim? Back to topA misconception is that if the rental property is older than 1987, an investor can not claim any depreciation. The tax deductions are higher on a newer rental property but are still available on all investment properties. You are still eligible to claim for plant and equipment within the property. If the property is old, the biggest claim period for these items is and the first 3 years after settlement and then the depreciation will start to trickle through, so get in early!
How far can you backdate your tax? Back to topYou are able to backdate up to 2 years from the last time you submitted your last tax return.
Can you claim on renovations that have been carried out by previous owners? Back to topYes – when inspecting the rental property, we take into account all renovations that may have been carried out to the property and then estimate for the depreciation you are eligible to claim for.
Can you claim depreciation on an overseas property? Back to topNo matter where your property is in the world, you can claim depreciation if you are an Australian tax payer. We have serviced such countries as New Zealand, USA, Indonesia, UK.
Why use a Quantity Surveyor and not an Accountant? Back to topAs stated in the Tax Ruling 97/25 issue by the Australian Taxation Office (ATO), your accountant is not allowed to prepare a depreciation report if the property is newer than 1985. If older, they can carry out the report, though at what expense? They will not be inspecting your rental property and you may miss out on major deductions which we can guarantee, as Quantity Surveyors we make sure you claim every cent you are eligible to.
Everything you need to know about tax depreciation
Depreciation itself means that the value of particular assets decreases over time because of constant usage (wear and tear). As a term, depreciation is used in accounting and according to ATO rules for assets that decline in value each year. Tax depreciation reports help you reduce your taxable income and claim tax deductions.
The tax depreciation is usually calculated by determining the original cost or current value of the asset, including but not limited to the price, transportation and set-up expenses. Then we need to determine the written down value of the asset each year and subtract it from the first value. Hence, the deduction we get is the original value divided over the years of “effective life” of the asset.
If you’re wondering what the term “effective life” in a tax depreciation report is, you should turn to ATO regulations.
“ … The decline in value of a depreciating asset is generally based on its effective life; that is, how long it can be used to produce income … The effective life is used to work out the asset’s decline in value (or depreciation) for which an income tax deduction can be claimed …”
Washington Brown works in complete compliance with ATO guidelines, and according to the latest changes regarding the effective life of depreciating assets, applicable from 1 July 2018. Every tax depreciation report we produce is valid for up to 40 years.
If you prefer to speak one on one with an expert regarding your tax depreciation, you are free to get in touch, and we’ll explain everything to you in great detail.
Why is a tax depreciation report required?
A tax depreciation report is required by law if you want to reduce the taxable income on your investment property through depreciation. Since it’s apparent that you can’t assess and review the state of your assets by yourself, you need a qualified Quantity Surveyor to review the property. Furthermore, you would want an established quantity surveying organisation to do your tax depreciation.
Washington Brown was founded in 1978, which makes it one of the oldest most respected quantity surveying organisations in Australia. It’s led by Directors Tyron Hyde and Tom Lander. Moreover, once you schedule a tax depreciation consultation with us, our quantity surveyors will determine if an inspection is required for your investment property and organise it as fast as possible. That’s because we understand how valuable your time is and the goal is to save you money, in every form.
Another essential piece of information is that Washington Brown is fully registered with the Australian Institute of Quantity Surveyors. That means that we are authorised to prepare a depreciation report for property investors. Once you get our report, you will see that we divide it into easily understandable categories and we also include joint ownership and split reports.
Furthermore, our reports are based on three crucial pillars:
- accounting experience
- construction industry knowledge
- detailed understanding of property related tax law