There are many reasons why investors miss out on claiming property depreciation. Sometimes they believe their property is too old, or they don’t think depreciation is available if the property was only leased during part of the year.
A new trend that BMT Tax Depreciation has uncovered is that investors believe that they can’t claim depreciation if their schedule wasn’t completed before June 30.
Before we explain why this isn’t the case, let’s cover the basics first.
What is property depreciation?
Property depreciation is the natural wear and tear of a building and its assets over time. Owners of income-producing properties can claim depreciation as a tax deduction each year.
Since depreciation is a tax deduction, a common misconception is that investors can go to their accountant who can automatically calculate their depreciation deductions. However, this isn’t the case and there’s one additional step needed to claim depreciation.
What is a tax depreciation schedule?
A tax depreciation schedule prepared by a specialist quantity surveyor is essential to claiming depreciation. Your schedule is tailored to your property and incorporates every legislative requirement to ensure claims are maximised and compliance is maintained.
Your accountant will use a schedule to determine your depreciation deductions every year. For residential properties, a schedule lasts forty years.
What happens if your tax depreciation schedule is completed after June 30?
We are all too familiar with the tax time process. As an investor, some of the expenses you’ll find yourself claiming include interest repayments, repair costs and property management fees.
The common trait all these expenses hold is that you have paid for them during the financial year. This is where the misconception that depreciation can’t be claimed if the schedule was completed after June 30 comes from.
In reality, if you didn’t get your tax depreciation schedule prepared before June 30, you can still claim for last financial year. This is because your schedule starts from your settlement date, not the schedule completion date.
This means if your schedule was completed in August 2020, you can still claim depreciation for the 2019-20 financial year. If you have missed out on depreciation for even longer, you can claim back missed dollars by amending previous tax returns with your new schedule.
Benefits of getting a tax depreciation schedule completed before June 30
It’s always recommended to organise a tax depreciation schedule once a property is available to rent. Doing so means you can start claiming depreciation sooner rather than later.
When you organise a tax depreciation schedule before June 30, you can claim the schedule fee straight back that financial year. This is possible because the schedule fee is 100 per cent tax deductible.
To learn more deprecation and how it can increase the cash flow from your investment property, Request a Quote of call BMT Tax Depreciation on 1300 728 726