Tax time tips for Property Investors

27 Jul 2022

With the end of financial year comes lodging your tax returns. We recently interviewed Matthew Vaughan-Davies, Partner from the prominent Perth accounting firm Carbon Group and delved into questions around depreciation on rental properties and other tax time tips.
What is depreciation?
As a property gets older, the building’s structure and the assets within it wear out – they depreciate.
The Australian Taxation Office (ATO) allows owners of residential rental properties to claim this depreciation as a tax deduction.
The easiest and quickest way to claim depreciation on your rental property is to get a tax depreciation schedule prepared for the property.

Do I need to seek out an accountant who specialises in property investment?
No – at Carbon we have strong knowledge of depreciation – and are proactive enough to bring this to the attention of our clients. We then refer our clients onto a preferred depreciation agent for their depreciation assessment.

What is a Tax Depreciation Schedule?
A Tax Depreciation Schedule is a detailed, forty-year forecast table, illustrating all depreciable plant and equipment and capital works deductions.
Every residential property investor should have a Tax Depreciation Schedule to substantiate and claim maximum deductions.
As the owner of a residential investment property, claiming depreciation deductions can make a big difference to your cash flow.
Of all the tax deductions available to property investors, depreciation is the second largest deduction available after interest.
Both new, and old residential investment properties have substantial depreciable value. 

Why should I claim?
Claiming tax depreciation reduces your taxable income, meaning you pay less tax. You may be eligible for thousands of dollars in depreciation deductions each year.

Who can claim?
Tax depreciation deductions are available for both residential investment properties and commercial buildings. Most properties, new and old, have depreciation available.

What can you claim?
You don’t need to spend money to claim tax depreciation. Tax depreciation deductions are split into two categories:
Division 43: Capital works deductions
Division 40: Plant and equipment depreciation

What do I need to provide to my account to get a Tax Depreciation Schedule prepared?

  • List of assets purchased during the year including date, cost and nature
  • For a full depreciation report on a property – we will arrange an inspection of the property through a preferred depreciation agent. If the property if off the plan, they can often complete an assessment remotely.
Do I need to get a Tax Depreciation Schedule done each financial year?
No. However, if new items are purchased (such as a washing machine), an accountant will need to take this up manually.

What else apart from depreciation can I claim for with my investment property?
  • Interest
  • Ownership costs
  • Repairs and Maintenance
  • Utilities
  • Travel no longer claimable
Does my Property Manager need to supply any information?
Settlement statements, sale contracts etc are always useful to be kept on file for the accountant.

How do Carbon assist their property investor clients?
  • Making sure negative gearing is maximised
  • Referral to depreciation agent if applicable
  • Maintenance of Asset schedule
  • Assistance with CGT events
  • Peace of mind to client and understanding of negative gearing, Tax implications etc.
Have any rules been changed since my 2020-21 tax return?
No, the rules have not changed since the 2020-21 financial year.
Have further questions? We’d love to help you. Reach out today and one of our experienced team can assist.

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