Have you purchased or already own a property which is second hand or existing?
It is a common misconception that existing properties do not yield any worthwhile depreciation. At Duo Tax, we are actively educating investors on the relevant laws and tax deductions available within investment properties and find that the above is not always the case.
To qualify, your dwelling needs to have been constructed after 1987 or renovated after 1992. Renovations are a key component of depreciation, as any works complete by yourself or the previous owner may amount to beneficial deductions.
Where the construction date is not known, the quantity surveyor can estimate the build date and provide the right advice to whether you will attain worthwhile deductions. Generally, properties built prior to 1987 have had some form of renovation completed, and the quantity surveyor is able to estimate the value of any capital expenditure.
To further demonstrate, we’ve prepared a case study of a common scenario illustrating how claiming on the residual depreciation can boost your cash flow and assist your property tax strategy.
Emilio has purchased a 3-bedroom house built in 1989 to add to this investment portfolio. Emilio is aware of depreciation deductions as he has purchased a few brand-new properties prior. Unsure if claiming depreciation is worthwhile, Emilio engages a quantity surveyor who has ascertained the following:
A deduction of $2,432 yearly was achieved on the original structure of the building. This type of capital works deduction encases the concrete slab, roofing, plasterboards and any other permanent assets during the original construction period in 1989. Furthermore, the quantity surveyor had also identified a further $57,448 in renovations made by the previous owner in 2013.
The result, Emilio is able to claim a tax deduction of $3,629 yearly in depreciation which has resulted in approximately $1,100 in cash refunds yearly. Emilio can expect to claim the same amount for the next 10 years and further given the 40-year ATO ruling on capital works deductions.
More Australian investors are experiencing the cash flow benefits available through property related tax deductions. The most recent ATO taxation statistics for the 2016/17 Financial year reported 3 million more property investors making claims on their rental properties; a 3.38% increase when compared to the prior financial year. Investors are encouraged to book in a complimentary phone consultation with the friendly and knowledgeable staff at Duo Tax to ensure that they are claiming the maximum deductions possible to increase their returns.
If you are in a similar situation like many existing property purchasers, not knowing the date of construction of your rental property, we always suggest to liaise with our office on 1300 185 498 or reply to this email with a rental property address. There are multiple resources that can be used to obtain construction completion dates that Duo Tax Quantity Surveyors has access to as a professional body. We are able to provide accurate estimates of depreciation once we have this and it’s as simple as a phone a call or an email to us.