Property Depreciation Allowances

Quantity Surveyor – Melbourne

We're hiring 2Napier & Blakeley are internationally recognised as a leader in the provision of Property Depreciation and were the first provider of depreciation schedules and advice in the Australian market in 1985 and remains the leader in this field today.

Our Melbourne CBD office is currently seeking a Quantity Surveyor with 2 to 3 years of experience to join their Tax Depreciation team immediately.

Property Depreciation services also include:

  • Property Inspections
  • Completing of depreciation schedules for commercial and residential clients
  • Undertaking reinstatement cost assessments
  • General adhoc duties as required Continue reading

Tax Q&A: Your Questions on Depreciation Returns, Answered

Q:  I am looking at buying my first investment property this year, and a friend has advised me to purchase a unit instead of a house for better depreciation benefits. I don’t quite understand how this works: houses are bigger, therefore shouldn’t the depreciation returns be higher? I would love some advice before I invest, as I’m aiming to keep my cash flow position as strong as possible (ideally I want a neutral or positively geared investment).

Thanks, Dale

A:  Residential investment properties are usually classified into four main types of building: residential houses, townhouses, apartments or units (low-rise and/or high-rise). All these do allow you to obtain different types of capital allowance deductions.

If you are claiming under Division 40 on the above brand-new properties, you are generally entitled to claim the following percentages of the construction costs as a capital allowance:

a. Residential houses: 5–10%
b. Townhouses: 5–15%
c. Units/apartments, low-rise: 5–15%
d. Units/apartments, high-rise: 10–20% Continue reading

Tax time is here – Are you paying too much tax ?

Tax timeDo you own or have you bought an investment property in the past financial year?

Or…  have you recently refurbished, altered or extended your investment property in the past financial year?

Or…  do you own an investment property but have never claimed depreciation in the past?

Or… own any property including commercial, retail, industrial, residential, pubs, clubs, sporting – we are experts in them all.

If your answer is yes to any of these questions then you may very well be paying too much tax on your income if you don’t claim your depreciation deductions. Continue reading

Tax Q&A: Your Tax Questions on Depreciation Schedule and Tax Return Claims, Answered

Q: I have just bought an investment property, which I plan to renovate in about six months’ time. It was leased when I bought it, and the lease runs out in October, so I plan to renovate it when my tenant moves out.

I’m not sure whether I should get a depreciation schedule done now so I can make a claim on my tax return this year, or wait until I’ve completed the renovation(and will therefore have a much better depreciation schedule)?

It seems like I will miss out on tax deductions this year, but I don’t want to spend the money on getting two depreciation reports. Which would be the best course of action?
- Thanks, Wayne

A: There are a few different things to consider here, starting with your initial acquisition.

As the property is income-producing, then you are able to claim allowances, as you point out. To get the benefits available to you, you should prepare an initial schedule that details all
the deductible items as at the time of settlement.

Deductions would be for depreciable plant under Division 40 and for structural items under Division 43, which will only apply if the building is young enough. You can then claim these allowances from settlement up until the point when either the property is no longer earning income or you decide to commence the renovation.

Having this initial schedule will provide you with the base document for your deductions going forward and also the base document to alter after you have completed the renovations. Continue reading

Depreciation dilemma : Is it better to buy new or old properties?

Paul Mazoletti croppedWhen considering depreciation, which will gain the greatest benefit from capital allowances: new or old properties? That is the ongoing question – one that Paul Mazoletti from Napier & Blakeley aims to answer once and for all.  Paul Mazoletti is a director at Napier & Blakeley, the first provider of depreciation schedules in the Australian market (since 1985).

Depreciation (capital allowances) can be a valuable tax deduction for any property investor and a great way to reduce your taxable income. However, the question of old versus new does come up a lot in discussions with investors.  So, who is right and who is wrong?   With effect from 9 May 2017, if you are focusing on capital allowances deductions, new property is the better way to go.  We could also suggest that neither is the ‘best’ way, as there are advantages to both.  However, if legislation is passed soon, the proposed changes will certainly lean you towards buying new.

The benefit of newer properties

The main benefit of buying a new investment property is that this will provide a higher total base tax deduction entitlement, when considering the combined value of fixtures and fittings the building structure’s value.  Deductions through the depreciation of fixtures and fittings under Division 40 may now only be available on any new investment property asset acquisition made after 9 May 2017.  Deductions through the depreciation of the building structure under Division 43 are also available on both new and older assets; we’ll explore this further later in the article.  The ATO introduced capital allowances in 1985 for the residential sector, coincidentally at the same time as Napier & Blakeley opened its first office in Australia and launched its capital allowances business. Continue reading

Tax time is coming – Are you paying too much tax ?

Do you own or have you bought an investment property in the past financial year?

Or…  have you recently refurbished, altered or extended your investment property in the past financial year?Tax time

Or…  do you own an investment property but have never claimed depreciation in the past?

Or… own any property including commercial, retail, industrial, residential, pubs, clubs, sporting – we are experts in them all.

If your answer is yes to any of these questions then you may very well be paying too much tax on your income if you don’t claim your depreciation deductions.

Property tax allowances (commonly known as depreciation) provide an opportunity for owners of income producing property to reduce their taxable income, thus reducing the tax payable.   Continue reading

Tax Q&A: Questions on Unclaimed Depreciation on Property, Answered.

Q: I own a three-bedroom townhouse that I bought three years ago for $434,000.

I never bothered getting a depreciation schedule as the place was 17 years old, and I was always under the impression that depreciation was only for new homes. However, I recently read in this magazine that older homes can attract good depreciation benefi ts as well.

What kind of depreciation schedule would I be able to get on this type of property, and can I go back and make claims on my previous tax returns? It’s a two-storey townhouse, with three bedrooms, and there is airconditioning in the main areas and living room, with a pool in the complex.
Thanks, Drew.

A: Property tax depreciation allowances or ‘capital allowances’ are calculated based upon two different sections of income tax legislation and consider two different aspects of your asset. The two main areas to property tax deductions are: Plant & Equipment; and the Capital Works deductions.

Plant & Equipment (also known as Division 40) are items that are usually fixtures and fi ttings, which can be easily removed from the property, as opposed to items that are permanently fixed to the structure of the building.

Plant and equipment items include, but are not limited to: hot water systems, carpets, blinds, ovens, cooktops, range hoods, freestanding furniture, air-conditioning systems, BBQs, heaters and flooring (floating floor boards).

“If you have not claimed depreciation on your property in the past, it is possible to amend previous tax returns – to a point” Continue reading

Budget 2017 Depreciation Deductions

House roofsIn the Federal Budget on 9th May, depreciation allowances forming part of an investors income tax deductions for second hand residential investment properties were effectively killed off.

This will apply to the purchase of any second hand properties where the contract to buy is entered into after 7.30pm on 9th May 2017.

Contracts entered into prior to this date will be grandfathered and deductions will still be able to be claimed.

What this means is not entirely clear yet.

Will this mean, for example, that items previously considered to be plant and equipment and therefore deductible under Division 40 of the ITAA could now simply form part of the building and therefore become deductible as part of the building and included under Division 43 Capital Works deductions? Continue reading

Tax time is here again!

tax world cut outThe end of the financial year is upon us and we want to make sure you’ve got all your property tax bases covered!

If during the past few or this current financial year you’ve owned (or updated) an investment property and earned an assessable income from it then you are likely entitled to tax deductions and allowances or otherwise commonly called property tax depreciation.

For over 30 years Napier & Blakeley has analysed many thousands of properties, preparing property tax depreciation schedules for owners of virtually every type of property ranging in value from a few hundred thousand dollars to billions. There are well in excess of three million property investors within Australia and the majority of these owners are not likely to fully maximise available deductions, which can significantly affect and increase their after tax yields and cash flow.

In a recent analysis of a five year old commercial office building with a purchase price of $5m, a land value of $1m and an income of $500,000 we found the following;

If you claimed no depreciation and building allowances, your after tax income at the following rates would be: Continue reading

ATO is contacting Residential Investors – BEWARE!

Paul Mazoletti Backgroundv2The ATO has issued an early warning again this year.  As tax time is nearing to an end for EFOY16 (yes that was quick), the ATO is reminding all residential property and holiday home investors to get in order your deductions as they intend to review this sector for discrepancies.  Refer to the following link: :

In particular, all your expenditure and capital allowances must be recorded, apportioned correctly and accurately in accordance with the current legislation.  If you have made some profit in selling your investment property this financial year, the transaction may have resulted in a capital tax gains (CGT) event, and if not treated properly could result in a larger tax payment due than originally thought.  You must also have sufficient evidence your property was income producing thus providing you a trigger to claim any deductions.  Refer to the following link for a detailed explanation of what you may require for EOFYS 2016 on your residential property: Continue reading