There's still time to maximise your annual tax return

During this period, many investors will be gathering receipts, visiting their Accountants to complete their annual tax return and making plans for the year ahead. One reason is that investors can improve their cash flow through claiming depreciation deductions, allowing them to budget and save for the future. Of all the deductions investors can claim, depreciation is the most often missed. In fact, research suggests 80 per cent of investors fail to claim the maximum depreciation deductions they’re entitled to. Discovering what depreciation can be claimed is vital as the additional cash flow these deductions provide play a role in helping investors to budget and save for the future. Below are answers to some common questions investors ask and reasons why it’s important to discuss the depreciation potential of any investment property.

What is depreciation?

As a property gets older, the building and the items within it wear out. The Australian Taxation Office (ATO) governs legislation that allows owners of income producing properties to claim a deduction relating to this wear and tear.
Depreciation can be claimed by owners of residential rental properties and a variety of commercial properties including restaurants, hotels, offices and agricultural properties.

How much can you claim?

Depreciation can be quite a tax saving. The average deductions for residential property investors found in the first full financial year are $5,000 - $10,000.
These deductions reduce an investor’s taxable income and are applied based on the individual’s tax bracket.
Some investors who previously may have been required to pay additional tax back to the tax office could even find themselves receiving a sizable return.

How can investors use the extra cash?

The great thing about receiving a tax return is there’s no rule on how the money should be used. That tax cheque could be just what you need to afford an overseas holiday.
Of course, there are other options savvy property investors may prefer. Perhaps the funds will help with regular repairs and maintenance or it might be time to complete a renovation?
Ultimately, more cash in hand means you can budget and save for where it is needed most.

Are there any guidelines when making claims?

The ATO has always provided rules based on the construction commencement date and the property type on whether investors are eligible to claim depreciation deductions for the structure of the building.
The federal government has also recently proposed new rules regarding the depreciation of plant and equipment assets contained within a second-hand investment property exchanged after 7:30 pm on the 9th of May 2017.
Regardless of when a property is purchased, there are still likely to be substantial deductions available.

What’s required to make a claim?

To take advantage of depreciation, an investor must seek the advice of a specialist Quantity Surveyor. No matter whether a property is new or old, it is always worthwhile making a call to discover what can be claimed.
The ATO recognises Quantity Surveyors as one of the only professionals with the skills necessary to estimate construction costs for building depreciation purposes. They can provide an estimate to help investors to determine whether obtaining a comprehensive depreciation schedule is worthwhile.
Once an investor decides to order a depreciation schedule, a Quantity Surveyor will perform a perform a site inspection of the property which allows them to take detailed notes and photographs to ensure no deductions are missed.

Can I claim back missed deductions?

If you have owned a property for a couple of years and haven’t taken advantage of depreciation, don’t worry. An Accountant can assist you to adjust the previous two tax returns. This means you can go back and recoup any dollars you’ve missed.

What does it cost?

While there’s a fee involved in obtaining a depreciation schedule from a Quantity Surveyor this shouldn’t deter investors from arranging one.
The great news is a tax depreciation schedule is 100 per cent tax deductible. This means you can claim the fee charged by the Quantity Surveyor as part of your tax return.

This article is courtesy of Heron Todd White