What a write-off!

Author: ME

Published at: 8/26/2016 10:44:34 AM


What A Write Off


As a non-cash expense depreciation can be an investor’s best friend but there’s a good chance you’re not claiming every write-off you’re entitled to.


When it comes to residential property, investors can claim depreciation for items of ‘plant and equipment’ – that’s fixtures or items that can be easily removed; and also ‘capital works’, which are the structural elements of your building.


Plant and equipment covers things like hot water systems, carpets, stoves and air-con systems, while capital works deductions can be claimed for the historical construction costs of the building including wiring, doors, and even tiles and toilets. Apartment investors take note – you can also claim a stake in the depreciation of common facilities like lifts, pools and gyms.


None of this will be especially new to seasoned landlords. However many property investors continue to overlook depreciable items and that can mean missing out on valuable tax savings.


Five most overlooked claims


Quantity surveyors BMT Tax Depreciation[1] recently put together a list of five much-overlooked items that investors can depreciate: Among the top five are:


  1. Freestanding garden sheds
  2. Solar garden lights
  3. Intercom systems
  4. Ceiling fans
  5. Tennis court nets.


But wait, there’s more


Other items frequently overlooked for depreciation include freestanding bathroom accessories, door closers, garbage bins, exhaust fans, synthetic lawns, roller door motors, and swimming pool cleaning systems.


Sweat the small stuff – it adds up


Many investors remember to claim depreciation on larger items but it pays to sweat the small stuff.


It’s estimated that claiming the cost of smaller household assets such as shower curtains, smoke alarms and lawnmowers in your rental place can actually increase the cash flow generated by the property by around 15 per cent[2].


A formal depreciation schedule is a good investment


As with all aspects of tax, it is important to get things right. To be fair, the Tax Office does provide online guides for depreciation claims but it’s a complex area, and a rough estimate of your depreciation claim won’t pass muster with the tax man.


Having a depreciation schedule drawn up by a professional quantity surveyor will let you make the most of depreciation claims, while still sticking to the rules.


The cost of having the schedule drawn up can normally be claimed on tax, and you may even be able to go back and amend tax returns for previous years if it turns out you’ve underestimated prior year’s depreciation costs.

[1] BMT Tax Depreciation media release: Five things you didn't know you could depreciate, July 2015

[2] BMT Tax Depreciation media release: What do shower curtains, smoke alarms and garbage bins have in common? February 2015 http://www.bmtqs.com.au/news-media/media-releases/shower-curtains-smoke-alarms-garbage-bins