February 19, 2018

Are you missing out on tax depreciation claims?

Tax depreciation is a legitimate deduction that property investors can claim against their taxable income, yet countless Australians miss out on depreciation claims each year, forfeiting thousands of dollars in potential tax savings in the process. 

Claiming for the decline in value of your investment property and/or the items within it, is easier than you think with the help of a qualified quantity surveyor

So, how do you get started?

What can you claim?

In laymen’s terms, if you are generating income from an investment property, you can claim back the decline in building value, or asset, via a tax deduction. There are a couple of conditions, if your residential investment property was built prior to 1985 you can only claim depreciation on Division 40, Depreciating Assets, if construction commenced after 1985, you can claim both Division 43, Capital Works Allowance and Division 40, Plant and Equipment. Commercial investment properties have varied dates applicable, please contact us for clarification.

Unlike most tax deductions, property depreciation is a ‘non-cash expense’, meaning you don’t actually need to splash out the cash every year in order to make a claim, however, you do need a valid tax depreciation schedule, which is where Rawlinsons (W.A.) comes in.

The Australian Taxation Office has identified that a Quantity Surveyor is the profession properly qualified to produce a legal property tax depreciation schedule. Accountants, by Australian tax law, are no longer authorised to prepare or estimate construction costs.

So, whats included in a tax depreciation schedule? 

Division 43: Capital Works Allowance

These are immovable structural elements of building, for examples; roof, ceiling, walls, foundations, swimming pool etc.. As well as fixed assets like; toilets, tiles and built in furniture. Basically, if it is part of the structure, its a capital works allowance.

A note to remember, a Capital Works Allowance is calculated on the building construction cost at the time it was built, not the purchase price you just paid for your investment property.

Division 40: Depreciating Assets

This element of the tax depreciation schedule applies to plant and equipment like; carpets, blinds, floating floorboards, ovens, dishwashers, air conditioners and smoke alarms. Each of these items has its own diminishing life, as set out by the Australian Taxation Office, your tax depreciation schedule will be calculated using these values.

How long is my tax depreciation schedule valid? 

For the lifetime of the property. It will only require updating should you perform renovations, improvements or purchase new assets for the property.

Why should Rawlinsons (W.A.) compile my tax depreciation schedule? 

The answer is simple, Rawlinsons (W.A.) are in their 64th year of business, making them the oldest Quantity Surveying and Construction Cost Management firm in Australia. Our experienced Quantity Surveyors are highly trained, holding Bachelors of Science in Construction Management and are members of the Australian Institute of Quantity Surveyors. 

As the creators and editors of the extensively circulated Rawlinsons Australian Construction Handbook and Rawlinsons Construction Cost Guide, our staff have access to the most comprehensive and current library of construction pricing information and data sources in Australia, at all times.

So, if you’re the owner of a property that is generating income, having a qualified quantity surveyor perform a tax depreciation schedule could help you make significant savings at the end of each financial year. Contact our Perth office and chat to one of our Quantity Surveyors to organise your tax depreciation schedule today.

Written by
Kirsty Maxted for Rawlinsons