Almost 50% of landlords fail to make depreciation claims against their investment properties, potentially missing out on thousands of dollars at tax time.
The trouble is that many landlords either aren’t aware of the benefits associated with depreciation, or don’t have an up-to-date depreciation schedule. This document enables them to claim against the reduction in value of items such as carpets, curtains, stove cook tops, some light fixtures, shower heads and so on.
Landlords can claim between 10% and 20% against a variety of depreciable items, and sometimes more, and in many cases, 2.5% of the building cost of the investment home on an annual basis.
It’s also worth noting that the potential depreciation claims for new homes makes them an extremely attractive option. One important benefit that new homes offer investors is considerable capital depreciation, with up to 60% of the purchase price potentially tax-deductible over the life of the property.
As a general rule, the newer the property, the more you can claim, making purchasing a near-new house or apartment potentially more worthwhile, in a taxation sense, than an established home, at least for the first five or so years of ownership. According to quantity surveying firm BMT, who specialise in depreciation schedules, a brand new residential home valued at $300,000 could potentially provide a landlord with cumulative depreciation claims of $30,000 over a five year period. That said, every depreciation assessment is different and the benefits are calculated on a case-by-case basis.
Finally, the costs associated with a depreciation schedule, which can be between $650 and $700 per report, are also tax deductible.
Your property manager can assist in booking a depreciation schedule. If this is of interest to you, get in touch with them today on 02 9327 7971.