By Paul Bennion, Managing Director, DEPPRO
The huge amount of money that property owners are now paying in property taxes each year has been highlighted by the 2019/2020 Budget recently handed down by the New South Wales Government.
It shows that during this financial year, the New South Wales Government plans to collect more than $12 billion in property taxes - an increase of nearly $1 billion property taxes compared to the previous financial year.
This is made up of $7.72 billion in stamp duty and $4.60 billion in land tax collections.
Over the next two years these property taxes are expected to further surge to over $13 billion per annum.
Not only are property owners in New South Wales being hit hard by rising property taxes, but property owners throughout Australia are also feeling the pain.
It may surprise you to learn that property owners throughout Australia are paying collectively more than $3 million in property taxes every hour of each day.
According to the latest ABS data, State and local governments collected more than $30 billion in property taxes during the 2017-2018 financial year.
Property taxes have been a major source of growth income for state and local governments with the ABS data showing that these property taxes have increased by $9 billion over the preceding 5 years.
Their heavy reliance on these property taxes is underlined by the fact that local government relies exclusively on property taxes, while state governments draw around 14% of their tax revenues from property.
These figures highlight the need for property owners throughout Australia to fully claim their legitimate tax deductions especially relating to tax deprecation.
Tax depreciation benefits can substantially boost the cash flow of property investors which has been used to pay these property taxes.
For example, the generous tax refunds that can be obtained through undertaking a professional tax depreciation report can amount to thousands of dollars each year and help to offset these annual Government taxes.
DEPPRO has currently a large range of clients who annually receive very large tax refunds each year through claiming their legitimate deprecation tax benefit and use these refunds to help pay Government property taxes.
These generous tax depreciation benefits can equate to up to 60% of the property price of a property. That's means potential tax benefits of $300,000, for example, on a property purchased for $500,000.
Over the coming months, many investors will be looking at buying investment properties to coincide with the start of the new financial year.
If you buy an investment property, it is important to complete a tax depreciation schedule as soon as possible after settlement so that it complies with ATO guidelines.
For the initial cost of a tax depreciation report - which is tax deductible - by legitimately claiming their full depreciation allowances clients can achieve thousands of dollars in tax benefits each year from their investment. Even an older style home can also qualify for substantial tax depreciation benefits if a depreciation schedule is undertaken around the time of settlement.
To protect their interests and ensure the depreciation report is fully compliant with ATO rulings, property investors should select a company, like DEPPRO, that is a member of the Australian Institute of Quantity Surveyors (AIQS) and uses systems that are fully compliant with ATO rulings.
