Not Too Late to Depreciate: Maximising Tax Benefits

The end of the financial year can be a hectic time for many individuals and businesses. Amid the hustle and bustle of tax returns and financial assessments, important opportunities are sometimes overlooked. One such opportunity is claiming depreciation deductions on investment properties. If you’ve recently acquired a new investment property or made significant improvements to an existing one, you might be sitting on a goldmine of tax savings. In this blog, we’ll delve into the world of depreciation deductions and why it’s not too late to start benefiting from them.

Understanding Depreciation Deductions

Depreciation deductions, in the context of property ownership, allow you to claim a tax deduction for the decline in the value of your property’s assets. The Australian Taxation Office (ATO) permits property owners to leverage this financial advantage. What’s particularly appealing about depreciation deductions is that they are non-cash deductions, meaning you don’t have to shell out additional funds to claim them. Even if you’ve recently acquired a new property, you can still take advantage of this tax-saving strategy.

Timing Matters: Claiming Depreciation in Each Taxable Year

The process of claiming depreciation deductions should start as soon as you purchase a property. However, it’s not the end of the world if you’ve missed out on these deductions in the past. You can retroactively claim deductions for up to two years, but this necessitates amending your income tax returns for each of those years. It’s a bit of paperwork, but the potential savings are well worth the effort. The ATO has laid out some guidelines and insights on property depreciation that can provide further clarity on the topic.

The Overlooked Benefits of Depreciation

Depreciation deductions are frequently overlooked by property investors, which is quite unfortunate because they carry substantial tax benefits. These benefits can significantly impact your financial well-being and investment returns, making them a valuable aspect of property ownership.

When to Order Your Depreciation Schedule

To maximize the benefits of depreciation deductions, it’s advisable to order your depreciation schedule in the same financial year as your property acquisition. However, this doesn’t mean you’ve missed the boat if you didn’t do so. You can still organize a depreciation schedule in the following financial year and start claiming your deductions. The key is not to let this opportunity slip away.

Understanding the Assessment of Depreciable Values

To effectively claim depreciation deductions, you need to assess two key elements:

a) Capital Works: These are the permanent components of your property, such as walls, the roof, plumbing, and electrical systems. Essentially, they are the non-removable fixtures.

b) Plant & Equipment: This category includes all removable items within your property, such as appliances, carpets, and window coverings. These items are subject to depreciation as well.

The assessment of depreciable values is best handled by a qualified Quantity Surveyor. They will compile a comprehensive depreciation schedule that lists all depreciable assets and calculates the depreciation for you. If you need recommendations for a reliable Quantity Surveyor, we’re more than happy to provide you with their contact information.

Speak to Your Financial Advisor or Accountant

If you believe you might have overlooked some depreciation benefits, it’s crucial to consult with your financial advisor or accountant. They can help you navigate the intricacies of the ATO’s depreciation deduction allowances and ensure you’re making the most of this valuable tax-saving opportunity.

In conclusion, it’s not too late to depreciate. If you own an investment property, it’s time to start exploring the potential tax benefits of depreciation deductions. These deductions can significantly reduce your taxable income, leading to substantial savings. So, don’t let this opportunity pass you by. Consult with professionals, order your depreciation schedule, and reap the rewards of a well-managed property investment. It’s a financial decision you won’t regret.

Contact us if you have any questions!