Amending Tax Returns to Capture Depreciation on Previous Years

Tuan Duong

As an investor, you may have recently come to terms with depreciation and may have been unaware that you were entitled to claim deductions on your rental property. You may have thought your property was too old when it actually qualifies for depreciation – act now before it’s too late!

Besides the ATO allowing you to claim tax depreciation on your investment property year by year, you are also allowed to backdate your missed deductions. If you have held an investment property for a prolonged period but have not claimed depreciation yet, you are entitled to backdate this and amend previous years of lodgement for up to a two-year period.

Individuals and small businesses generally have a two-year period or four-year-period respectively, which is from the day you are given a notice of assessment for the year. Depending on your circumstances, the ATO may allow you to backdate further. This is at the discretion of the ATO and we ask that you clarify with your accountant in regard to this.

The ruling from the ATO explicitly states “You have two years from the day the notice of assessment is given by the Commissioner to lodge a within time amendment request. If the time limit has passed, you can’t request an amendment, but you may be able to lodge an objection. While the time limit for lodging amendments and objections is the same, you can request an extension of time to lodge an objection in some circumstances.”
Further information about amending a tax return can be viewed by clicking here.

Furthermore, the ATO does allow tax payers to go even further back (more than two years) by raising an Objection, however the request to adjust your tax return using this method is at the discretion of the Australian Tax Office. More relevant information can be found here.

The following scenario below is a depiction of how effective back claiming is.

Devin purchases a 4-bedroom house on August 5th 2016 as an investment property. He has held this property as an investment since purchase and had no knowledge about the tax benefits that the ATO provides.

In 2019, Devin’s accountant has only recently advised to him that he is able to claim the building depreciation as a tax deduction per annum. In light of this, Devin wishes to backdate the claims to ensure he captures all the deductions available to him.

By consulting Duo Tax, we surveyed the property and found the following deductions below.

Financial YearsTax Deductions
2016 – 2017$11,000
2017 – 2018$12,000
2018 – 2019$11,500

Instead of potentially missing these deductions, Devin was able to amend his previous tax returns through his accountant. With the additional tax deductions of $23,000 through the 2-year period, he was able to receive additional cash back on his previous lodgements.

Duo Tax team working together

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Disclaimer: Please note that every effort has been made to ensure that the information provided in this guide is accurate. You should note, however, that the information is intended as a guide only, providing an overview of general information available to property investors. This guide is not intended to be an exhaustive source of information and should not be seen to constitute legal or tax advice. You should, where necessary, seek a second professional opinion for any legal or tax issues raised in your investing affairs.

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Tuan Duong

Tuan is an award winning Quantity Surveyor and leads Duo Tax Quantity Surveyors – Australia’s fastest growing provider of Tax Depreciation.

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