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The Secrets of Depreciation

Each year thousands of savvy investors wanting to secure their financial future choose to purchase an investment property. Many understand that there are tax advantages of owning an investment property. Fewer take advantage of ‘all’ the tax deductions available to them.

It’s surprising when you consider it’s often the largest deduction after interest payments.

One of the most overlooked deductions is Depreciation. It’s surprising when you consider it’s often the largest deduction after interest payments. Some investors know about depreciation but underestimate the deductions available without checking. It’s common to assume incorrectly there’s no depreciation available on an older property. $1000s in additional tax deductions could easily be missed. Fortunately, the ATO allows up to two prior years of returns to be amended so all is not lost, but don’t leave it too long.

In 2020 some properties have sat vacant for a period or rents have been reduced due to COVID-19. Tax deductions are more important than ever, they’re also completely unaffected by fluctuations in rental income. As long as the property is available for rent with realistic rent expectations and conditions deductions can still be claimed, regardless of rental income.

When it comes to Depreciation it pays to check with the experts who can tell you how much of a claim you might have.

Here are a few Depreciation tips to ensure you’re not leaving any deductions on the table:

  • It’s always best to have an expert provide an estimate of your available depreciation, it’s a free service.
  • Even older properties often have substantial Depreciation available due to prior renovations.
  • If you’re currently living in a property and are planning on turning it into an investment you may be considering a renovation to make the property more appealing. Hold off until after you move out. Assets like curtains and blinds, dishwashers, ovens etc can’t be depreciated if they’re used, but can be when they’re new.
  • The same rule above applies if you’re planning on supplying furniture to a tenant.
  • Considering a new property for your portfolio? Get a Depreciation estimate prior to purchase so you understand your tax position.
  • Properties less than 6-months old (even if tenanted) at the time when they became an investment are treated as new and offer the same depreciation as brand new properties.

To work out how much depreciation you’re entitled to claim you’ll need a Tax Depreciation Schedule from a Quantity Surveying firm. Many of our clients have used Depreciator and have had a great experience. They specialise in Tax Depreciation; it’s all they do.

They will be happy to provide a no obligation quote and an estimate of your available depreciation. Lodge an enquiry now!

If you would like our FREE E-book “The Secrets of Depreciation that every property investor should know”, please feel free to email us or if you would like to purchase an investment property, book in a time to chat with George.

PS  This article is prepared based on general information. It does not take into account individual financial or property objectives or needs and is not financial product or investment advice.