Tax season is here, and for property investors, it's a prime opportunity to maximise returns through tax depreciation.
Understanding and utilising tax depreciation can lead to significant savings by reducing your taxable income. In this guide, we'll explore the essentials of tax depreciation, the importance of a Tax Depreciation Schedule, and how to choose the right professional to help you claim your deductions.
Understanding Tax Depreciation: What You Need to Know
Tax depreciation allows property investors to claim deductions for the wear and tear on their investment properties. This deduction helps lower your taxable income, resulting in substantial tax savings. Depreciation is divided into two main categories: Capital Works Deductions and Plant and Equipment Depreciation.
• Capital Works Deductions: These deductions cover the building’s structure and permanently fixed items, such as doors, windows, and sinks. They typically account for 85-90% of depreciation claims.
• Plant and Equipment Depreciation: This category includes items that can be easily removed or replaced, like carpets, blinds, and appliances.
By leveraging these deductions, investors can save thousands of dollars annually, enhancing the profitability of their investment properties.
The Role of a Tax Depreciation Schedule
A Tax Depreciation Schedule is a crucial document that outlines all the available tax depreciation deductions for your investment property. This schedule simplifies the process for your accountant to incorporate these deductions into your tax return, ensuring you receive the maximum possible benefits.
• Long-term Use: A Tax Depreciation Schedule is valid for 40 years, allowing you to use it repeatedly each tax season.
• Significant Savings: On average, investors save around $9,000 in deductions in their first full financial year after obtaining a schedule. It can also help adjust previous tax returns to claim missed deductions.
Obtaining a Tax Depreciation Schedule requires a professional’s assistance, but the one-time fee is fully tax-deductible, making it a worthwhile investment.
Choosing the Right Professional for Your Tax Depreciation Schedule
Only registered tax agents are authorised to create a Tax Depreciation Schedule, but it’s advisable to hire a specialist quantity surveyor. These professionals are recognised by the Australian Taxation Office (ATO) and have the expertise to maximise your deductions.
The Importance of a Specialist Quantity Surveyor
• Expertise and Qualifications: Quantity surveyors are tertiary qualified professionals who specialise in building measurement and estimating construction costs.
• Maximised Deductions: Employing a quantity surveyor who specialises in tax depreciation, particularly one affiliated with the Australian Institute of Quantity Surveyors (AIQS), ensures you get the most deductions and, consequently, the highest return.
By selecting the right professional, you can rest assured that your Tax Depreciation Schedule will be accurate and comprehensive, providing you with significant tax savings.
Tax depreciation is an invaluable tool for property investors, offering substantial tax savings and increasing the profitability of investment properties. By understanding the basics of tax depreciation, obtaining a comprehensive Tax Depreciation Schedule, and choosing a specialist quantity surveyor, you can make the most of this tax season and beyond.
For more expert advice and assistance with your investment property, contact our experienced property management team today.
