Depreciation is the natural wear and tear of a building and the assets within it over time. The Australian Taxation Office allows owners of income-producing properties to claim depreciation as a tax deduction.
There are two types of depreciation. Capital works are claimed on the building’s structure and items that are permanently fixed to the property, and plant and equipment are items that are easily removable from the property or are mechanical in nature such as ovens, cooktops, and rangehoods.
Depreciation is a non-cash deduction, meaning an investor doesn’t need to spend any money to be eligible to make a claim. Because of this, depreciation deductions are often overlooked.
Failing to claim depreciation can mean missing out on thousands of dollars.
Appliances, blinds, and flooring can all be claimed as depreciation
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Claim the cost of your schedule straight away
To maximise deductions and claim all eligible assets, you can organise a tax depreciation schedule soon after you purchase a property.
Generally, a depreciation schedule will have a one-off cost that lasts the life of the property and will ensure all claims are maximised and are fully ATO compliant. Please confirm this with your preferred depreciation experts.
The cost of a depreciation schedule is 100% tax deductible, and depreciation schedules conducted before 30th June can be claimed in the current financial year.
Partial year claims
You don’t have to have owned a property for a full financial year before claiming depreciation deductions. You can claim depreciation if you have only owned a property for a short time before the end of the financial year, even if that is weeks or days.
The depreciation value of the assets will be calculated by how long the property has been owned. For instance, if the property has been owned and rented out for a period of three months, the owner is eligible for 25% of the yearly deductions.
Receive payments regularly using Pay as You Go (PAYG)
By arranging a depreciation schedule sooner, you can access additional cash flow throughout the year by incorporating a PAYG withholding variation.
With the help of your accountant, submitting a PAYG withholding variation will estimate your expected tax return for the financial year, allowing your employer to take less tax out of your wages.
It’s important to speak with your specialist quantity surveyor to organise a tax depreciation schedule before submitting a PAYG withholding variation as this information will be used to help accurately estimate your tax return.
You will still need to visit your accountant at the end of the financial year so they can calculate the actual amount of tax liability.
Access additional cash flow throughout the year by incorporating PAYG withholding
Claim missed deductions
It is always advisable to stay on top of your finances by claiming deductions in the same applicable year, as delaying your claim will only add extra confusion and stress to your next tax return.
However, if previous depreciation deductions weren’t claimed, the ATO allows you to recover missed payments from past financial years by adjusting your tax return.
This is useful for investors who were previously unaware of depreciation deductions.
What do I do next?
Obtaining your tax depreciation schedule before June 30 is important if you want to maximise your returns and keep your finances on track.
It is always advisable to stay on top of your finances by claiming deductions in the same applicable year, as delaying your claim will only add extra confusion and stress to your next tax return.
However, if previous depreciation deductions weren’t claimed, the ATO allows you to recover missed payments from past financial years by adjusting your tax return.
This is useful for investors who were previously unaware of depreciation deductions.
To find out how you can organise a depreciation schedule contact our friendly property management team who will put you in touch with our preferred depreciation partners.
