Tax Depreciation for Investment Property

WHAT WE DO CLAIM
In the 2011-2012 financial year, the modern period Australian Tax Office stats are for sale for, over 623,000 Victorians made deduction claims on property expenses. The most common were for council rates, 564,890 claims, water charges, 539, 890, insurance, 476, 055, interest on the loans, 474,375, property agent fees, 443, 430, and repairs and maintenance, 437, 625. Less commonly claimed were hips, 15, 630, bug elimination, 19, 575, and cleaning expenses, 62, 835. H&R Block regional director Frank Brass said many homeowners were conscious of most from the things they can claim – but there are gaps.

WHAT WE DON’T CLAIM
Most property investors probably weren’t claiming everything they can be, in accordance with Mr Brass. “Part from it is it’s very difficult to know very well what sort of records you have to keep and individuals just give up trying to keep them,” he was quoted saying. “(And) these are scared of doing a bad thing.” But there is absolutely no reason to be. If your records, receipts and invoices have been in good order and in many cases if you’ve prepared them yourself, when you have done it on the best of what you can do and are not being fraudulent, then this tax office is normally understanding, Mr Brass said. He also noted you could potentially claim a fifth of the borrowing expenses for that first 5yrs after you purchased.

This compensates stamp duty and legal expenses charged about the mortgage. Meanwhile, Bradley Beer, the managing director at BMT tax depreciation specialists, estimated between 70 and 80 per-cent of investors just weren’t getting the maximum return on depreciation claims. “The average novice of deductions for the first 12 month of having a property is about $10,000, well as over 10 years it comes down to $7000 each year,” Mr Beer said. He described depreciation claims as an easy way of having value of wear and tear about the structure within your property accommodated through the tax office. “The building sports out, whether or not the property is gaining value,” Mr Beer said. To get the most out of this you’d likely are interested in a quantity surveyor – and it is not just new properties that will make claims. “If you acquire a house several years ago and several years ago spent $100,000 on the renovation, you will discover things in it that will always be depreciating, even when you have missed the first 5yrs,” Mr Beer said. Plus you may claim as soon as you rent against eachother, Mr Beer said. The same applies if you pick a renovated property.

WHAT TO WATCH FOR
Mr Brass said lots of people were caught out whenever they redrew up against the equity inside an investment property for individual use, and didn’t adjust the quantity they claimed for for their interest.

“You won’t be able to claim the entire interest around the loan,” he stated. “And what has caught people out for quite some time is they don’t believe to apportion a person’s eye.” There are instances in which a couple may get a property both in their names but have one too make the tax claims and Mr Brass noted folks have been caught out at this.

“You must handle the tax side on the property as outlined by the names about the title,” he stated. He also said that when you were claiming depreciation, those claims can be returned on the Government once you sell the house and included with your capital gains tax payment. For holiday house owners it is important to remember it is possible to only claim against them just as one investment if you actually rent them out.

If you are planning to sell, the waiver to capital gains tax only refers to your principal place of residence for your time you might have lived within it. The 50 per-cent reduction for the tax only applies if you could have owned the home and property for in excess of 12 months.

CLAIMS TO CONSIDER

  • Advertising for tenants;
  • Owners corporation fees;
  • Gardening and lawn mowing;
  • Interest on loans;
  • Quantity surveyor’s fees;
  • Building materials including concrete, floorboards and tiles could be claimed as
    depreciations;
  • Carpet, garbage bins, mechanised doors and blinds can be claimed as they age;
  • Apartment and unit buyers could also claim against common areas;
  • Travel expenses for property inspections;
  • Insurance;

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