By Paul Bennion, Managing Director of DEPPRO
1 July is an important date for the property sector throughout Australia as it is the start of a new financial year.
Millions of people throughout Australia will be visiting their accountants after this date to submit their tax returns for the previous financial year.
For property investors, it is a time when they should fully maximize their tax deductions related to depreciation.
DEPPRO estimates that a majority of property investors do not fully claim their legitimate depreciation benefits and collectively miss out on millions of dollars in tax refunds.
For a new property, these tax deprecation benefits can account for up to 60% of the purchase price of a property!
The amount that can be deducted depends on the age and value of the building but it is varies between 2.5% to 4% of the capital works value of the building each year.
An investor can claim these tax benefits by using the services of the tax depreciation specialist called who prepares a tax depreciation schedule.
A depreciation schedule is a report undertaken by a quantity surveyor company (such as DEPPRO). It generally should be undertaken when the investor buys the property.
The quantity surveyor produces a tax depreciation schedule for clients which is a physical snap shot of the property.
For example, DEPPRO sends out a staff member to the client's property and they fill in a report and take pictures of the property to estimate depreciation benefits.
The investor gives this report to their accountant and this is used by them to work out how much tax benefits they can obtain each year.
This on-site inspection report is critical in ensuring that the tax depreciation report is compliant with the strict Australian Tax Office (ATO) requirements. Depreciation claims which are not based on an onsite inspection could result in huge ATO penalties for the investor.
Therefore, if you are getting a tax depreciation report prepared by a depreciation company like DEPPRO, the very first question you should ask is whether the report will be based on an on-site inspection.
You only need to do one depreciation report for a property and it can be updated each year by the accountant if the investor for example, installs a new kitchen.
Even if an investor has owned an investment property for several years and not claimed depreciation benefits, they can still claim them retrospectively with a depreciation report.
The cost of a depreciation report is prepared by DEPPRO and costs around $600. This report is tax deductible and covers the lifetime ownership of the investment property.
Click the following link deppro.com.au and complete the details to ensure your client receives a higher return on their cashflow.