Property Tax

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 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

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: :   https://www.ato.gov.au/Tax-professionals/Newsroom/Your-practice/Deductions-for-rental-property-owners/?tpissue-10-2016

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:  https://www.ato.gov.au/General/Property/Residential-rental-properties/ Continue reading

Negative Gearing – Property Depreciation get it while you can!

In recent years there has been much debate about the pros and cons of negative gearing in the property industry and what impact removing it from the investment horizon would make.

We get a call every day from clients about this and clearly it is an issue that will affect the investment activity of some investors in the property market.

Whilst recent announcements from politicians on both sides of politics have highlighted that negative gearing is in the cross hairs, it remains to be seen what might actually happen going forward.

We can however be sure (at this stage) that there are no moves afoot to make any changes to claiming property tax depreciation deductions on your investment property, so you can still enjoy these substantial benefits that will significantly enhance your investment cash flow and after tax return going forward. Continue reading

It’s your money… don’t let it get away !

its your money imageAre you getting the best return from your investment property ?

Each year, millions of dollars in property depreciation goes unclaimed by property investors who don’t know how and what to claim – or who find the whole thing too hard.

Let us worry about it, so you don’t have to.

Napier and Blakeley are the property tax depreciation specialists. We’ve been working for investors for over thirty years, making sure they maximise their deductions – and get the best return. Our specialist quantity surveyors are among the most experienced and qualified in the country, and are advised by our research team on the latest revisions from the Australian Taxation Office. Continue reading

End of Year Investment Property Tax List

Let us assist you with depreciation tax deductions on your investment property and we will guarantee a happy new financial year for you.

Why pay too much tax ? and improve your cash flow at the same time, it’s a no brainer !

It’s the end of financial year again and if you own investment property, you should claim the available depreciation and building allowance deductions.

If you are not sure what to claim we will assist you, no matter how large or small your investment property is, we have analysed every type of property and can guarantee that we will generate significant tax saving for you and that the payback on our fees will be very short and maybe only a matter of months. Continue reading

End of Year Investment Property Tax List

 Property Tax Deductions are available as follows:

  • Depreciation of plant – such as air conditioning and mechanical ventilation, some electrical items, lighting, carpets, lifts, furniture and fittings.
  • Building Structure (Capital Allowances) for investment properties constructed after July 1982, or for refurbishment, renovations, additions alterations after that date.

Now answer these questions…

  1. Have you got a current depreciation schedule? If not Napier & Blakeley are qualified to establish values for the depreciating assets that you own.
  2. Have you bought an investment property throughout the tax year?
  3. Have you altered, renovated or added to your existing investment property throughout the tax year?
  4. Have you demolished all or parts of your investment property?
  5. Have you changed, added to or thrown out any items of fitout or FF & E during the financial year?

The establishment of a compliant depreciation schedule allows you to calculate your entitlements to Depreciation and Capital Allowances deductions and to manage the process of change to your asset.  Continue reading