Anthony Keane* says property investors across Australia are forgetting to claim tax on a simple deduction that could be costing them thousands of dollars a year.
Many of Australia’s 2.1 million rental property owners are missing out on thousands of dollars of tax deductions each year by failing to correctly calculate depreciation.
New figures from BMT Tax Depreciation show that since tax time started on 1 July, its investor clients have achieved depreciation claims averaging $8,893 per property.
That’s much more than the latest Australian Taxation Office (ATO) records, showing average annual claims totalling $3,600 for capital works (construction costs), plant and equipment.
BMT Tax Depreciation CEO, Bradley Beer said many investors failed to seek adequate advice.
“Thousands of dollars of legitimate tax deductions are being left on the table each year,” he said.
Big ticket items such as ovens and carpets often provided the biggest deductions, Mr Beer said, but investors should not ignore smaller items worth less than $300 — such as bins and smoke alarms — that could be claimed in full immediately.
Capital works deductions were often $5,000 in the first year.
For 2017–18, one BMT client claimed depreciation deductions of $85,346 for a $4.9 million unit in Sydney, while a property in Cooktown, Queensland, produced deductions of $56,462.
Binnari Property Managing Director, David Hancock said depreciation made owning rental properties more affordable, especially in the early years when there were the most cash flow pressures.
However, many investors did their own tax and accounts and were unaware about what depreciation could be claimed.
“I have often seen clients who have owned investment properties for five, six or seven years and have never claimed any form of depreciation because they weren’t aware what it was,” Mr Hancock said.
“That’s the benefit of getting advice — you often don’t know what you don’t know.”
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New rules introduced last financial year have taken some of the shine off depreciation deductions, but thousands of dollars can still be claimed by many property investors.
“It’s business as usual if it’s a brand new property, but if you are the second owner it’s only the physical building that’s deductible,” Mr Hancock said.
“The plant and equipment is no longer deductible unless you go out and purchase the items yourself.”
Mr Beer said the new rules did not apply to any property owned before 9 May 2017, which was when they were announced in the Federal Budget.
He said property investors who had already done their tax returns this year without claiming enough depreciation could speak with their accountant and lodge an amendment request.
“The ATO allows individuals and small businesses to go back and amend the previous two financial years’ tax returns,” he said.
“We always recommend that investors speak with a specialist quantity surveyor as soon as possible to organise a schedule that outlines the deductions available.”
Depreciation schedules are themselves tax deductible and generally cost up to $700, although the prices and claims can vary significantly between providers.
* Anthony Keane is personal finance writer at News Corp Australia in Adelaide. He tweets at @keanemoney.
This article first appeared at www.news.com.au.
