Several myths prevail when it comes to tax depreciation in Australia. The things that property investors are eligible to claim may cause confusion to many. Tax depreciation may provide benefits to anyone having possession of an investment property. You must have a clear understanding of how much your investment property may depreciate over a period of time. With better understanding, you can claim these values during tax time. A tax depreciation schedule will enable you to make your rental property work for you. It is imperative to boost your knowledge about specific rules that apply while claiming a tax depreciation deduction.
Discussed below are some of the tax depreciation myths that should be known to all:
Myth#1: My accountant will help me organise this for me
Busted: It is not allowed for accountants, property estimators, and real estate agents to assess construction costs. These people cannot estimate the cost of the construction for properties constructed afterward in 1985. Australian Taxation Office or ATO has recognised Quantity Surveyors as the right authority to assess real construction costs in situations where that figure remains unspecified.
Myth#2: You will only be able to depreciate newly built properties
Busted: You can also depreciate older properties. An investor can claim two kinds of depreciation. One is capital works deductions for properties where construction began after September 15, 1987. Clear knowledge of Australian tax return is a must for property investors. And, second is a plant and equipment asset for detachable fittings and fixtures that you can remove with ease. Property investors can claim capital works deductions on any type of structural renovation that has taken place. There were some changes to depreciation rules that took place in the year 2017. These rules imply that some investors will not be allowed to claim plant and equipment. These rules will not impact those property investors who had exchanged contracts before May 9, 2017.
Myth#3: I had my investment property for about two-year tenure sans a schedule so I cannot claim depreciation
Busted: The statement does not hold any truth. You are still eligible to claim the last year’s depreciation. This is also called as recouping missing deductions. You can still claim for them for a period of up to two previous financial years without any hassles. Tax return Australia clearly specifies that you will be eligible to claim the previous year’s depreciation.
Myth#4: You may have to spend more money each year
Busted: The tax depreciation schedule remains binding and valid for a period of up to 40 years. The one-off fee is totally tax-deductible.
Myth#5: Renovations were carried out by the previous owner. And, I won’t be able to claim for them
Busted: It is hardly a matter of concern if the renovation was carried out by the previous owner. When you bought the investment property, you also bought the right to claim for its depreciation on any renovation.
The above points let you know how to claim more deductions and make payment of less tax. With these points, you will be able to yield a better return on your investment property. The above information is in complete compliance with ATO so that you can estimate your property value in the right way. You must understand that not all construction costs are eligible for depreciation. When you claim depreciation on a building, you can only claim what exists there now.