Investment Property Tips – Depreciation
Wanting to capitalise on the rental property that you own? A lot of people hold rental properties for a two-fold reason: to negative-gear (reduce their current taxable income) and to obtain capital growth from the property in future years.
To maximise negative gearing it is advisable to obtain a quantity surveyor’s report to utilise the maximum depreciation possible. The surveyor will look at all fixtures and fittings on the property and assign a value to each from which depreciation can be calculated.
If the building was constructed after 17 July 1985 (for residential properties) the quantity surveyor can estimate the cost of building the premises and a capital works deduction of 2.5% can be claimed on that.
This may not seem like much but you may be surprised at how much it can increase your deductions. If you consider a building that cost $110,000 to build at a rate of 2.5%, that will be $2,750 in deductions claimable. Now add to that items such as carpets, curtains, blinds, hot water systems, ovens, stoves, dishwashers, light fittings, security systems, air conditioners/heaters etc, the claimable depreciation amount could rise to around $6,000.
When you consider that kind of deduction with an income of $80,000 it will give you a tax saving of $2490… each year! Even on a lower income between $30,000 to $75,000 you would still receive a tax benefit of $1,890 per year.
A quantity surveyor will provide a report on the property giving a breakdown of the fixtures and fittings as well as the capital works amount in depreciation schedules tailoring to prime cost, diminishing value and low-value pools. Armed with this, you can give it to your tax agent when you do your next tax return.
You can find quantity surveyors in the phone book and their prices usually range from $600 to $800 which can be written off over a period of five years. All-in-all it’s not a bad investment.
When asked, we refer our clients to Capital Claims Pty Ltd – you can give them a call on (02) 4920 6500.
Capital Claims Pty Ltd has a combined 17 years experience in quantity surveying specialising in tax depreciation. Both Mark Wilkins and Alan McCully are members of the Australian Institute of Quantity Surveyors. You will find the team to be friendly and their fees to be highly competitve. You can even request a report simply by emailing a no-fuss online application.
For more information visit www.capitalclaims.com.au.
This information is for guidance only and is not intended as specific advice to any reader. Professional advice should be obtained before acting on any information contained herein. The publisher accepts no responsibility for loss occasioned to any person or organisation as a result of action or the refrain of action as a consequence of the contents of this publication.