Submitted by: Chie Suarez
Not many people are knowledgeable of what depreciation means and they often ask about how it can help you comes tax deduction time. Are you one belonging in that spectrum?
Year after year, many property owners and investors let thousands of dollars go down the drain for it goes unclaimed. Why so? Because none of them are wise enough to know there is to claim and how to determine it.
Before you jump on renovation and selling the property, here are the basic information you need to know and that will guide you into fully understanding property depreciation.
What is property depreciation?
Depreciation is a vital factor in your property investment strategy. It is used by investors to recover the value of the commercial income property and increase the cost of its net operating income.
Significant tax breaks are calculated for the owner. Much like the wear and tear one claims in their car purchase, one can also claim their property investment’s depreciation for taxable income purposes.
Also, it’s important to note that depreciation is a non-cash deduction. The deductions come within the purchase rate of your property.
What items can be depreciated?
There are two types of allowances at hand:
Depreciation on Plant and Equipment pertains to those items within the premises of the property such as dishwashers, stoves, air conditioning units, microwave oven, blinds and curtains and the works.
Depreciation on Building Allowance pertains to the construction costs of the property itself. For instance, roof replacements, concrete and brickwork, door and window fittings, electrical wirings, florr and wall tiles, capital improvements and the likes.
How does a depreciation schedule help?
To put it simply, a tax depreciation schedule is a document that reminds you and your accountant the amount of depreciation to claim on your property. It helps you pay less tax.
This document is necessary in order to make a claim for your depreciation costs. The report will be divided into different categories that will illustrate the amount that will effectively reduce your taxable income.
Great news, you’ll only need to prepare your tax depreciation schedule once. Given that, you shouldn’t have any excuse on why you’re unable to prepare and settle this report.
How long will it take?
You shouldn’t expect a quantity surveyor to finish the report in over a night. Your depreciation schedule could take up to three weeks to get done so long as the quantity surveyor can inspect your lot without delay.
How much will this cost?
The concrete cost of analyzing a tax depreciation schedule varies on the type of property you’ve purchased, its size and location along with several other factors.
Most of the leading quantity surveying companies offer free reports or money-back guarantee promotions. It’s also worth mentioning that quantity surveyors’ fees are 100% tax deductible.
Who will inspect the property?
The one best qualified to prepare your depreciation schedule and inspection on your property is a quantity surveyor. These people are identified by the Australian Taxation Office (ATO) to be the ones qualified to accurately estimate the construction costs; and note and photograph depreciable items.
The report of all depreciable items serves as an evidence should an audit ensues. A piece of advice: the best time to bring a quantity surveyor for property inspection is right after settlement and just before your tenant moves in the property.
How much tax will I save?
As mentioned previously, each property is different and your tax depreciation schedule varies on certain factors within and beyond the property. There are some good depreciator calculator you can find upon a quick Google search while you can also inquire on depreciator services for a more accurate estimation. Some would even give one for free or at a fairly low value.
For more info, contact your tax agent or your most reliable tax depreciation expert.
About Chie Suarez
Chie is a daytime writer for Depreciator – Tax Depreciation Schedule, a company dedicated completely to Tax Depreciation Schedules that aids the Australian property market.
May 4, 2016