Property investors are missing out on thousands of dollars’ worth of potential tax savings, with 80% failing to claim depreciation on investment properties, according to Raine & Horne and quantity surveying firm, BMT Tax Depreciation.
Angus Raine, CEO of Raine & Horne, is urging property investors to be pro-active about determining depreciation on rental properties before June 30.
“Many investors do not understand how to properly claim depreciation on residential properties”, says Raine. “Anecdotal evidence from our network of offices and the experience of BMT Tax Depreciation shows around four out of five landlords overlook this entirely legitimate tax deduction, thereby paying far more in tax than necessary.”
As a guide to the potential tax savings, BMT indicates that an investor could claim cumulative depreciation of approximately $50,000 in the first five years on a new two bedroom unit costing $400,000.
He says investors can claim building depreciation on a ‘surprisingly broad range’ of rental property items, including: built-in kitchen cupboards, clotheslines, door and window fittings, driveways and garages, fences, retaining walls, sinks, basins, baths and toilet bowls.
“They can also claim depreciation on carpets, vinyl, and linoleum, as well as hot water systems, heaters, solar panels and air conditioning units,” says Raine.“Many also forget that blinds, curtains and light fittings are depreciable items, as are security systems.”
Apartment investors may also be able to claim depreciation on common property such as lifts and even gym equipment.
“Landlords can claim between 10-40% annually – sometimes more, on depreciable items and in many cases 2.5% of the building cost can be claimed each year for 40 years,” he adds.
Raine says having a formal depreciation schedule drafted by a registered quantity surveyor is the best way for landlords to ensure they comply with complex tax laws.
“This one-off expense can cost around $700, but this can also be claimed on tax.”
Furthermore, generous depreciation claims are not restricted to new properties.
“Up to 60% of a new property’s purchase price is potentially tax-deductible over the life of the property,” says BMT managing director, Brad Beer.
“But for established properties it is also possible to back-date any missed depreciation costs by two years. “Seeking professional advice for depreciation on new and old investment properties is crucial. Preparing depreciation reports is a complex process, but a specialist will ensure your claim is maximised every time,” says Beer.
Investors can claim depreciation on a broad range of rental property items, including:
Floating timber floors
Carpets, vinyl, linoleum
Hot water systems, heaters, solar panels and air conditioning units
Blinds, curtains and light fittings