The property was brand new when I bought it, so I’m hoping depreciation benefits will still be available. I also have a query regarding depreciation and inheritance. If a married couple have an investment property and they are claiming plant and equipment depreciation, and then one spouse dies, can the surviving spouse (who inherited the existing investment property) continue to claim the plant and equipment depreciation?
Many thanks, Sam 

A: With regard to your first question, unfortunately you won’t be able to claim depreciation on existing plant and equipment assets due to the recent change in the depreciation legislation in May 2017.

These changes affect second-hand investment properties that were purchased and/or rented after 1 July 2017, as in your case. In these situations, plant and equipment assets are considered pre-existing and previously used.

The depreciation on your plant and equipment assets began when you purchased your property.

But they only became depreciable against your income when you started to rent out the property after 1 July 2017. You can claim plant and equipment items such as a new dishwasher, fridge, etc., if you bought these new and installed them in your second-hand property.

“You won’t be able to claim depreciation on existing plant and equipment assets due to the recent change in the depreciation legislation”

The other scenario in which you can claim depreciation is when you buy a new residential investment property such as a house or apartment, including
all assets, direct from a developer or builder.
The new legislation did not change the rules on claiming the building component of a residential investment property, so not all is lost
on claiming a tax deduction on second-hand properties purchased after 1 July 2017.

Any property owners who were leasing their residential investment properties before 1 July 2017 can continue to claim the depreciation on their assets until they replace particular assets or sell their residential property investment.

In regard to your second question, in this case the spouse’s ability to claim
will depend on the date the property was inherited. If it was before 1 July 2017, you can continue to claim the depreciation on your assets, plus building allowance, based on the values of the original inherited depreciation.

But if the property was inherited after 1 July 2017, your claim will be allowed only on the depreciation value of the building allowance.
As in the above case, the assets are considered pre-existing and previously used so are not allowed under the new changes.

The above rules also apply to investors who inherit a property from family members, relatives, friends, de factos or divorcees.

Of course, if you were lucky enough to win a property through a raffle or competition and then sold it on, the same rules would apply to the respective owners.

Need to know
- Changes in legislation have impacted depreciation claims on existing plant and equipment assets.
- Plant and equipment assets can only be depreciated if bought new.
- If the property was first leased before 1 July 2017, different rules apply.

For more information on this or any other query, please contact:

Paul Mazoletti
National Director of Property Depreciation & Insurance
t. 07 3221 8255
m. 0408 749 202
e. pmazoletti@napierblakeley.com

Published in Your Investment Property
July 2018

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%

The above percentages are a standard benchmark for fittings and plant and equipment that qualify for a deduction, and do not include any special fittings such as vacuum-ducted systems, electronic blinds, solar panels, high-quality kitchen white goods, etc.

You can also be entitled to a higher-percentage claim for units/apartments (high-rise), as you are allowed to claim your portion of the common property for items such as lifts and basement ventilation.

In addition to the above, if you purchase any new furniture to fit out your investment property, this generally can all be claimed in the first seven years.  With all these properties, in addition to Division 40 Capital Plant allowances you are also entitled to claim under Division 43, which is the construction cost of the property from the date its construction was completed.

The size, location and construction cost of the property will dictate what you can claim as a deduction for capital allowances. In addition, you may be able
to claim your entitlement to common property for the next 40 years.

Another factor to consider when chasing deductions is that if you purchase in a hotel/motel or a short-term accommodation strata-tiled property, the capital works are depreciated at 4% per annum of construction costs and not 2.5%. These investments usually come with a furniture package, which further enhances your total deductions to be claimed.

The above table highlights that if you are looking for maximum depreciation deductions, you should probably buy new and in a high-rise apartment.

Need to know
• All building types allow you to obtain different types of capital allowances deductions.
• You can maximise depreciation deductions by buying a new high-rise apartment.
• New furniture bought for your investment property can generally be claimed in the first seven years.

For more information on this or any other query, please contact:

Paul Mazoletti
National Director of Property Depreciation & Insurance
t. 07 3221 8255
m. 0408 749 202
e. pmazoletti@napierblakeley.com

Published in Your Investment Property
August 2017

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.

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.  

Napier & Blakeley was the first Australian company to provide specialist property depreciation services with dedicated in-house specialists to identify all available deductions throughout the life cycle of your asset.

Don’t waste any more of your money, request a quote today or contact us to get advice on how a depreciation schedule can strengthen the return on your investment putting more money in your pocket.

Please contact any of the people below for further assistance :

BRISBANE
Paul Mazoletti
National Director
o.  07 3221 8255
m. 0408 749 202
e.  pmazoletti@napierblakeley.com

BRISBANE
Kath Hemphill
National Residential Manager
o.  1300 730 382
m. 0409 722 709
e.  khemphill@napierblakeley.com

MELBOURNE
John Mathew
o.  03 9915 6300
m. 0414 559 326
e.  jmathew@napierblakeley.com

SYDNEY
Peter Osborn
o.  02 9299 1899
m. 0439 765 571
e.  posborn@napierblakeley.com

SYDNEY
Peter Guerra
o.  02 9299 1899
m. 0423 567 159
e.  pguerra@napierblakeley.com

For 32 years and counting Napier & Blakeley have been providing the following services to the property industry:

• Property Acquisition & Disposal Technical Due Diligence
• Property Development Due Diligence
• Quantity Surveying
• Capital Expenditure Forecasting
• Make Good Reporting
• Energy Management
• Development Monitoring
• Property Tax Depreciation

Please contact any of the people below for more information or assistance:

SYDNEY
Alastair Walker
Managing Director
o.  02 9299 1899
m. 0419 503 289
e.  awalker@napierblakeley.com

MELBOURNE
Craig Smith
Director
o.  03 9915 6300
m. 0407 371 664
e.  csmith@napierblakeley.com

BRISBANE
Paul Mazoletti
National Director
o.  07 3221 8255
m. 0408 749 202
e.  pmazoletti@napierblakeley.com

PERTH
Graham Rigby
Senior Associate
o.  08 9489 4895
m. 0419 847 998
e.  grigby@napierblakeley.com

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.

I’m not sure about the extent of the renovations you are planning, but no doubt there will be items on the original schedule that will remain post-renovation, items that will be demolished and disposed of, and completely new items that you can depreciate going forward.

An important point for the new depreciation schedule post-renovation is that you must capture all the costs of the renovation in as much detail as you can get from either the builder or the individual trades companies that carry out the work for you, as this will make it a lot easier to create the new schedule.

You should also document other costs, such as design fees, permits and so on, and either add these into the new depreciation schedule or get advice from your accountant as to how these costs may be taken up in your tax return.

“The fees associated with doing two schedules would still be well spent and the deductions generated would pay these fees many times over”

There may also be an opportunity to write off 100% of the balance of the costs associated with items in your original depreciation schedule that were demolished during the renovation, and you should discuss this possibility with your accountant.

In terms of value for money and doing two schedules, in our experience the fees associated with doing two schedules would still be well spent and the deductions generated would pay these fees many times over, so our advice would be to get a schedule done at initial settlement and then get that schedule revised post-renovations.

For more information on this or any other query, please contact:

Paul Mazoletti
National Director of Property Depreciation & Insurance
t. 07 3221 8255
m. 0408 749 202
e. pmazoletti@napierblakeley.com

Published in Your Investment Property
July 2017

When 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.

Since then, a few of the fundamentals of capital allowances have changed in regard to what you can claim on a property. What remains the same is the question of what provides the biggest deductions, and which properties provide the most value, particularly with regard to new and old properties.  Every situation is different, and certainly newer properties are now looking very attractive, as outlined below.  Deductions under ‘Capital Allowances’ are categorised into two main divisions:

• Division 43 Capital Works (Building)
• Division 40 Capital Allowances (Depreciating Assets – Plant)

Division 43 Capital Works (Building) – Old vs new

Division 43 relates to the calculation of the construction expenditure on both building and structural improvements. To calculate the construction expenditure for building allowance deductions as defined in Section 43-70 ITAA 1997, you require a suitably qualified person (a quantity surveyor) who can certify the cost of constructing a building, in addition to structural improvements such as driveways, fences, etc., as at the date they was installed and completed.  This cost is then apportioned over the tax life of the building (usually 40 years or 2.5% per annum) and can be claimed as a tax deduction.

Second-hand residential deductions commence from when an investment asset was completed.  For example, if in 2017 you purchased a 10-year-old house built in 2007, you need to determine the construction cost as at 2007 and start claiming an allowance per annum for the remaining 30 years, as 10 years have already passed.  This is all you can claim now, in accordance  with the proposed new legislation.   If you recently purchased a new house, you have the next 40 years to claim this allowance per annum.  The construction expenditure and size of the house will determine what you can claim in the year you buy or build, and how far into the future you can claim deductions is dependent on the age of the building. This also applies to low-rise townhouses and high-rise apartments.

Another consideration is that if the property is within a body corporate you will also be able to claim an additional portion of the building’s common property.  This allowance depreciates the same as the building, but is apportioned in accordance with your interest entitlement.  On a second-hand property you are allowed to claim any recent refurbishments and/or extensions as well.  This can sometimes be attractive to buyers as they can claim for something old as well as new.

Example: If you purchased a large house built 10 years ago it may have cost $200,000 to build the structure and so you could claim this at 2.5% or $5,000 per annum for the next 30 years.  If you purchased the same large new house today it may have a building  structure cost of $300,000 and you could therefore claim at 2.5% or $7,500 per annum for the next 40 years. This is an example of how you can get more deductions for a new building than you do for an old building.  If, however, you purchased the large house built 10 years ago and then refurbished/extended it, and these structural costs were an additional $100,000, then you could claim another 2.5%, or $2,500 per annum, for the new works for 40 years, plus the $5,000 for the next 30 years on the original structure.   This would give you a total annual deduction of $7,500 per annum for at least 30 years.

Could items previously considered to be plant and equipment … now simply form part of the building and therefore become deductible as part of the building?

Rules of Depreciation

• Depreciation of fixtures and fittings under Division 40 is always available on any newinvestment property (to be confirmed by legislation shortly)
• You can generally claim 10–20% of a new property’s construction cost under Division 40
• For instance, a new property costing$400,000 to construct could generate $40k–$80k in capital allowance deductions over 10 years
• High-rise new apartments may attract more Division 40 deductions due to more communal amenities (eg lifts, pools)

If the property is within a body corporate,  you will also be able to claim additional deductions from the building’s common property.

Division 40 Capital Allowances (Depreciating Assets – Plant)

This part of the Act covers the principle of ‘decline in value’ of a depreciating asset. The definition of a depreciating asset is a separate topic that can’t be covered here.  However, with the proposed new legislation as of 9 May 2017, Division 40 Capital Allowances (Depreciating Assets – Plant) are available only for the purchase of new properties, although at this stage we are not sure of the exact details until legislation is passed.  But will this mean, for example, that items previously considered to be plant and equipment (and therefore deductible under Division 40) could now simply form part of the building and therefore become deductible as part of the building and included under Division 43 Capital Allowances deductions?

Some examples of depreciating assets are curtains, air conditioning, fire services, lifts, carpets, dishwashers and hot water units.  The effective lives of these items were previously considered to be lower than the general building structure and therefore they could be depreciated more quickly, giving a higher write-off value per annum.  The Australian Tax Handbook 2017, at 2,508 pages, lists all the capital allowances items you can claim and their respective effective lives.  The ‘effective life’ determined by the ATO is its  estimate of how long an item will last before it needs to be replaced, and this therefore determines the percentage depreciation rate.  For instance, the effective life of curtains and drapes is six years, a ceiling fan lives for 20, an electric or gas hot water unit lasts 12 years and a solar hot water system lasts 15 years.

The cost base for depreciating assets was based on the principle of reasonable apportionment that is defined in Subdivision 40-195 of the ITAA 1997. The opening value of any depreciating asset is now the new  purchase price and is not necessarily based on the age of the asset but on its income-producing capability and condition. This part of the Act will apply to all the depreciating assets of income producing buildings.

In simple terms, say a quantity surveyor inspects your property and determines that you have paid $2,000 for the curtains and drapes and these have an effective life of six years, the opening cost for depreciation will then be $2,000 and the taxpayer can claim an annual tax deduction of $333.  There are as yet no details on how these plant and equipment items’ values will need to be treated during a taxpayer’s ownership, but they will likely have to be calculated the items’ written-down values at the time of purchase.  There are also no details as to how costs for post 9 May renovations, refurbishments and extensions to investment assets will be treated or whether an investor can or cannot depreciate these items going forward.  On a positive note, this may influence a boost in  residential development as investors may be drawn to the higher deductions they can achieve by acquiring assets in new residential developments that are currently underway or planned for the future.  In summary, new property may now have the greatest edge  in terms of total deductions available, as shown in the table above.

Need help with depreciation?

Paul Mazoletti and the team at Napier & Blakeley have been helping Australian investors leverage depreciation schedules since 1985.
Ph. 07 3221 8255    www.napierblakeley.com

We have prepared depreciation schedules for all kinds of investors and properties, both residential and non-residential, for over 30 years and there are always so many variations to consider when constructing your depreciation schedule.  There are many factors to consider when determining this, which is why investors should use a quantity surveyor.  Keep in mind that professional fees to engage a suitable quantity surveyor are 100% deductible and will ensure your deductions are calculated accurately and in accordance with current legislation.

Published in Your Investment Property
August 2017

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.

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.  

Napier & Blakeley was the first Australian company to provide specialist property depreciation services with dedicated in-house specialists to identify all available deductions throughout the life cycle of your asset.

Don’t waste any more of your money, request a quote today or contact us to get advice on how a depreciation schedule can strengthen the return on your investment putting more money in your pocket.

Please contact any of the people below for further assistance :

BRISBANE
Paul Mazoletti
National Director
o.  07 3221 8255
m. 0408 749 202
e.  pmazoletti@napierblakeley.com

BRISBANE
Kath Hemphill
National Residential Manager
o.  1300 730 382
m. 0409 722 709
e.  khemphill@napierblakeley.com

MELBOURNE
John Mathew
o.  03 9915 6300
m. 0414 559 326
e.  jmathew@napierblakeley.com

SYDNEY
Peter Osborn
o.  02 9299 1899
m. 0439 765 571
e.  posborn@napierblakeley.com

SYDNEY
Peter Guerra
o.  02 9299 1899
m. 0423 567 159
e.  pguerra@napierblakeley.com

For 32 years and counting Napier & Blakeley have been providing the following services to the property industry:

• Property Acquisition & Disposal Technical Due Diligence
• Property Development Due Diligence
• Quantity Surveying
• Capital Expenditure Forecasting
• Make Good Reporting
• Energy Management
• Development Monitoring
• Property Tax Depreciation

Please contact any of the people below for more information or assistance:

SYDNEY
Alastair Walker
Managing Director
o.  02 9299 1899
m. 0419 503 289
e.  awalker@napierblakeley.com

MELBOURNE
Craig Smith
Director
o.  03 9915 6300
m. 0407 371 664
e.  csmith@napierblakeley.com

BRISBANE
Paul Mazoletti
National Director
o.  07 3221 8255
m. 0408 749 202
e.  pmazoletti@napierblakeley.com

PERTH
Graham Rigby
Senior Associate
o.  08 9489 4895
m. 0419 847 998
e.  grigby@napierblakeley.com

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”

Values ascribed to the Division 40 items relate to the purchase price of the property and commence depreciating from date of settlement or when you acquire the particular item. Our tax calculator on our website, will give you an estimate of what your yearly deductions may be.

For a townhouse purchased for approximately $434,000, as a guide, our calculator shows an estimate of $5,800 in year one, $5,500 in year two and $4,700 in year three.

Capital Works Allowances are a deduction for the structural elements of a building. These deductions are based on the historical construction costs of the building and include materials such as, but not limited to: bricks, mortar, plaster walls, flooring (fixed timber flooring), wiring, doors, tiles, windows, toilets, basins, shower hobs, guttering, roofing, concrete slabs, footpaths and driveways.

From the date that construction was completed, the Australian Taxation Office (ATO) has determined that any building eligible to claim capital works deductions has a maximum effective life of 40 years.

Therefore, investors can generally claim up to 40 years of deductions on a brand new building, whereas only the remaining balance of the 40-year period from the construction completion date is claimable on an older property. For example: if you purchase a building that was built 10 years ago, you effectively
can claim an annual deduction for the next 30 years based on the construction costs 10 years ago at 2.5% per annum.

You mention that your townhouse is 17 years old, therefore, generally you should be able to make a claim for the depreciation costs for the next 23 years. Capital Allowances are primarily based on the structure of your asset.

Claims for these are dependent on the original construction cost and when the building was built. Additionally, any renovations, extensions and renewals can also be claimed, and again costs as a base for these deductions have to be calculated as at the time that the work was completed.

Generally, non-residential properties built after July 1982 and residential properties built after July 1985 are eligible for Division 43 deductions. If you have not claimed depreciation on your property in the past, it is possible to amend previous tax returns – to a point. We recommend you seek advice with your accountant to determine how far and to what extent you can back-date your tax returns and claim these items.

The Australian Taxation Office (ATO) has specified that quantity surveyors are the professionals suitably qualified to estimate deductions, and they must also be registered tax agents; Napier & Blakeley are both of those.

For more information on this or any other query, please contact:

Paul Mazoletti
National Director of Property Depreciation & Insurance
t. 07 3221 8255
m. 0408 749 202
e. pmazoletti@napierblakeley.com

Published in Your Investment Property
June 2017

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?

Items of plant and equipment that could previously be depreciated under Division 40  include carpets, air conditioning, dishwashers, ceiling fans etc.

The level of deductions for plant and equipment in residential investments varies between different types of assets from free standing houses to high rise strata titled property, but could represent as much as 15% of the total deductions available. In the early years this can be in the order of 40-60% of the overall annual claim, which is a significant loss of deductions.

The effective lives of these items were previously considered to be lower than the general building structure and therefore they could be depreciated quicker giving a higher write off value per annum.

Under Division 43 the general building only attracts a 2.5% deduction per annum based on the original cost to construct and so annual deductions will be significantly lower per annum.

There are, as yet, no details on how these plant and equipment items values will need to be treated during a tax payers ownership, but will likely have to be calculated as their written down value as at the time of purchase.

There are also no details as to how costs for post 9th May renovations, refurbishments and extensions to investment assets will be treated or whether an investor can or cannot depreciate these items going forward.

On a positive note, this may influence a boost in residential development as investors may be drawn to the higher deductions they can achieve by acquiring assets in new residential developments that are currently underway or planned into the future.

Napier & Blakeley were the first company in Australia to prepare depreciation schedules and as you can imagine there have been numerous changes to depreciation legislation since we started in 1985. Accordingly we will work through these changes as more information becomes available and will provide updates on this as information rolls out in due course.

Please contact any of the people below for further assistance :

BRISBANE
Paul Mazoletti
National Director
o.  07 3221 8255
m. 0408 749 202
e.  pmazoletti@napierblakeley.com

MELBOURNE
John Mathew
o.  03 9915 6300
m. 0414 559 326
e.  jmathew@napierblakeley.com

SYDNEY
Peter Osborn
o.  02 9299 1899
m. 0439 765 571
e.  posborn@napierblakeley.com

SYDNEY
Peter Guerra
o.  02 9299 1899
m. 0423 567 159
e.  pguerra@napierblakeley.com

For 32 years and counting Napier & Blakeley have been providing the following services to the property industry:

• Property Acquisition & Disposal Technical Due Diligence
• Property Development Due Diligence
• Quantity Surveying
• Capital Expenditure Forecasting
• Make Good Reporting
• Energy Management
• Development Monitoring
• Property Tax Depreciation

Please contact any of the people below for more information or assistance:

SYDNEY
Alastair Walker
Managing Director
o.  02 9299 1899
m. 0419 503 289
e.  awalker@napierblakeley.com

MELBOURNE
Craig Smith
Director
o.  03 9915 6300
m. 0407 371 664
e.  csmith@napierblakeley.com

BRISBANE
Paul Mazoletti
National Director
o.  07 3221 8255
m. 0408 749 202
e.  pmazoletti@napierblakeley.com

PERTH
Graham Rigby
Senior Associate
o.  08 9489 4895
m. 0419 847 998
e.  grigby@napierblakeley.com

The 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:

However, if you did claim the available deductions and allowances your after tax income could be greatly increased:

There are some questions you should ask yourself about your properties:
1.  Have you acquired an investment property of any age, type or in state of repair?
2.  Have you completed any construction works?
3.  Have you completed a fit out?
4.  Has a tenant left your property and you have inherited their fit out?
5.  Has a tenant left your property and you have removed their fit out and made good?
6.  Have you paid any $ towards a tenant fit out?
If you have answered yes to any of these items and have not yet had your property tax depreciation schedules updated, you may well be missing out!

Contact Napier & Blakeley today and ensure that your position is maximised at tax time!

Paul Mazoletti National Director o.  07 3221 8255 m. 0408 749 202 e. pmazoletti@napierblakeley.com Peter Osborn Director – NSW, ACT o.  02 9299 1899 m. 0439 765 571 e.  posborn@napierblakeley.com     John Mathew Director – VIC, TAS, SA, WA o.  03 9915 6300 m. 0414 559 326 e. jmathew@napierblakeley.com Kath Hemphill National Residential Manager o.  07 3221 8255 m. 0409 722 709 e. khemphill@napierblakeley.com

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/

If you have a holiday home the ATO will be right on to you as well, especially if you have not declared any income but claimed deductions throughout the year. If you have some income, you may need to apportion your deductions with regards to private use and investment/rental use.  Refer to the following link for a detailed explanation of what you may require for your EOFY 2016 return:  https://www.ato.gov.au/General/Property/In-detail/Holiday-homes/

Should you wish to discuss your property and ensure you are maximising your tax deductions with the correct legislation categories and therefore increase your after tax cash position, please do not hesitate to contact any of our Property Depreciation Managers throughout Australia.

Remember, before the game changes again, June 30 is only a couple of months away, so get your property investments sorted early and maximise your claim while you can.

Have a safe Easter and beware your waist will not depreciate if you have too much chocolate!

Paul Mazoletti
National Tax Director