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A Property Tax Depreciation Schedule will save you money

Tax Depreciation Schedules for your investment property save you money

How Property Tax Depreciation Works

A tax depreciation schedule can help you save money by reducing your taxable income and therefore lowering your tax liability. A tax depreciation schedule is a report that outlines the depreciation deductions you can claim on your investment property over time. Depreciation is the reduction in value of an asset over time due to wear and tear, and it is a tax-deductible expense for your investment property.

Depreciation Reduces Taxable Income

By preparing a tax depreciation schedule, you can claim depreciation deductions on your investment property, including building structures and plant and equipment assets, such as air conditioning, carpets, and ovens. These deductions can help to reduce your taxable income, which can lower your tax liability and increase your cash flow.

Depreciation Schedules Help Maintenance Budgeting

In addition to reducing your tax liability, a tax depreciation schedule can also help you to budget for maintenance and repairs on your investment property. By identifying the expected lifespan of each asset in your property, the schedule can help you to plan for future expenses and make informed decisions about when to replace or upgrade your assets.

Summary

Overall, a tax depreciation schedule can help you to save money by reducing your tax liability and providing valuable insights into the expected lifespan and maintenance requirements of your investment property assets. It is important to consult with a qualified and experienced Quantity Surveyor such as Melbourne Tax Depreciation MTD to ensure that your tax depreciation schedule is accurate and compliant with relevant tax laws and regulations of the Australian Tax Office (ATO).

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Depreciation Affects Capital Gains

How Depreciation affects Capital Gains Tax

In Australia, depreciation is a tax deduction that allows owners of rental properties to claim the decline in value of assets such as carpets, furniture, and appliances over time. Depreciation can help reduce the taxable rental income, which in turn lowers the overall tax bill.

However, claiming depreciation can have an impact on the amount of capital gains tax payable when the property is sold. Capital gains tax is a tax on the profit made from the sale of an asset, and it applies to rental properties as well. The amount of capital gains tax payable is calculated as the difference between the sale price and the cost base of the property.

Property Cost Base

The cost base is the amount used to work out the capital gain, and it includes the original purchase price, costs of buying and selling, and any capital improvements made to the property. However, it also takes into account any deductions that have been claimed, including depreciation.

When depreciation deductions are claimed, they reduce the cost base of the property, which means that the capital gain is higher, and more capital gains tax may be payable when the property is sold. The amount of depreciation claimed is also taxed as assessable income at the taxpayer’s marginal tax rate, which can be as high as 45%. This is known as recaptured depreciation.

Worked Example

For example, let’s say you bought a rental property for $500,000 and claimed $50,000 in depreciation deductions over the years. If you sell the property for $700,000, your cost base would be reduced to $450,000, and your capital gain would be $250,000. However, if you had not claimed any depreciation deductions, your cost base would still be $500,000, and your capital gain would be $200,000, leading to less capital gains tax payable.

It’s important to note that Australian tax laws have specific rules and limitations around claiming depreciation on rental properties. For instance, the property must have been constructed after July 1985 for the owner to claim depreciation on the building. Owners may also need to obtain a tax depreciation schedule from a qualified quantity surveyor to ensure that the depreciation claims are accurate and meet the Australian Taxation Office requirements.

Summary

In summary, while claiming depreciation on a rental property can provide tax benefits in the short term, it’s essential to weigh the long-term implications and consult with a tax professional to determine the best approach for the specific situation. Claiming depreciation may lead to higher capital gains tax payable when the property is sold, and understanding the rules and limitations around claiming depreciation is crucial to avoid any adverse tax consequences.

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Tax Depreciation Schedules

Tax Depreciation Schedule also refered to as Tax Depreciation Reports or Quantity Surveyor Reports are documents that detail the tax deductions available for property owners and investors for the wear and tear of their investment property in Melbourne, Australia. The deductions are available as part of the Australian Taxation Office’s (ATO) taxation laws and regulations.

In general, tax depreciation can be claimed for most buildings and structures that are used to generate rental income, such as residential or commercial properties. The deductions are based on the declining value of the building and its components, such as fixtures, fittings, and appliances.

To claim tax depreciation, a property owner or investor must engage the services of a Quantity Surveyor such as Melbourne Tax Depreciation, who are professionals specialised in tax depreciation . The Quantity Surveyor will carry out a detailed inspection of the property and prepare a Tax Depreciation Schedule, which outlines the eligible deductions.

It is important to note that tax depreciation is a complex area of taxation law, and property owners and investors are advised to seek professional advice to ensure they are claiming all the deductions they are entitled to.

In conclusion, Melbourne tax depreciation can provide significant financial benefits for property owners and investors, reducing the taxable income and increasing their cash flow from the rental property.

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Victorian COVID 19 Lockdown

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INSPECTIONS

We are still operating under the current Victorian COVID lockdown for Tax Depreciation Schedules.
Limited residential on site inspections are being undertaken under stringent requirements.
All doors must be open with all lights turned on so nothing needs to be touched.
The resident must not have any symptoms, be isolating or have been in any form of contact with a covid positive person.
Our staff are vaccinated, have not been in any form of contact with persons displaying symptoms and have no symptoms themselves. Our Staff wear facemasks, protective gloves and single use footwear protection at all times.
We maintain safe distancing and prefer that the occupant(s) remain outside whilst the inspection is taking place. This takes around 15 to 20 minutes.

FACE TO FACE MEETINGS

We are currently not having face to face meetings during the current lockdown. Quotes may be obtained on line here- get quote now, or you can chat with an expert QS on our website.

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RBA Slashes Cash Rate to 0.5% Amid Corona Virus Fears

March cash rate slashed to 0.5% amid Corona Virus Outbreakthe Reserve Bank of Australia (RBA) slashes the official cash rate for March to 0.5 percent amid speculation the fallout from the COVID-19 would have a significant impact on our economy. Given the evolving situation it’s is difficult to predict the extent of the impact, however, it is expected that the economy will return to improved levels once the virus is contained.

“The Board took this decision to support the economy as it responds to the global coronavirus outbreak,” said RBA governor Philip Lowe.

“The coronavirus outbreak overseas is having a significant effect on the Australian economy at present, particularly in the education and travel sectors.

“Given the evolving situation, it is difficult to predict how large and long-lasting the effect will be. Once the coronavirus is contained, the Australian economy is expected to return to an improving trend.”

Let’s see what the big 4 Banks do.

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Depreciation on Older Properties Post 2017 Federal Budget

Depreciation for older Properties

Depreciation  Schedules for older properties revisited

 With the new rules from May 2017, can we still claim depreciation for these properties? 

The answer to some extent is yes and no.

The Australian Federal Government introduced The Treasury Laws Amendment ( housing tax Integrity )Bill 2017 introduced from 7: 30 pm May 2017 and as a result the following rules now apply:

Plant and equipment items formally claimable under division 40 can no longer be claimed if they have been previously used, however, if you buy a new dishwasher from a retailer and install it you can claim that particular item. If you were to take your old dishwasher from home and install it in your rental property, then you cannot claim a deduction for it as it is ‘previously used’.  This applies to all plant and equipment items which are things like appliances, heating & cooling, hot water, removable floor coverings, window furnishings and the like.

Capital Works Expenditure

Capital works items can still claim in relation to previously used properties.  These items are defined under div 43.

These items relate to anything constructed since July 1985 either by you, or a previous owner and and can be deducted at 2.5%per annum over a period of 40 years from the date of construction,  of the original building or the date of the relevant Improvement or extension to the original building.

Improvements can loosely be described as the ‘shell’ of the building and include things such as kitchen upgrades bathroom upgrades new roof plumbing roof restoration rewiring, re-stumping building additions  and many many more items including painting. it could include external items such as sheds fencing pavements and the like.

This is where our expert quantity surveyors at MTD have particular specialist experience over 4 decades in determining what items have been done since the original construction and additionally in white decade they have been done.

Apartments with Common Areas

Pre-existing  or previously used apartments that are part of a complex having common facilities and common areas that are subject to an owners corporation, have an advantage in that div 40 plant and equipment items included within these areas can still be claimed.

These items include things such as lifts, security, fire protection items, automatic door operators, emergency egress to name but a few.

Summary

In summary although there are some items that can no longer be deducted in relation to older or previously used properties, however there are still many thousands of dollars that can be claimed by way of having a specialist Quantity Surveyor assess your investment property.

Property investors with older previously used properties would still be well advised to include a properly prepared tax depreciation schedule in their tax returns so as to claim the benefits that are still available.

 

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Tax Return Time & Depreciation Schedules

Get your Tax Depreciation Schedule now that it's tax time
June 30 has come and gone and a Tax Depreciation Schedule for your investment property is a must have! when finalising your returns.

Depreciation Schedule Benefits

Claiming depreciation on your investment property will enable you to save thousands from your taxable income.

Even with the new legislation, from May 17th 2017 there are still thousands of dollars to claim on existing residential properties under Div 43 Capital Allowances.

These deductions can be claimed for 40 years from the date of construction in relation to any capital works undertaken since July 1985, either by you or a previous owner.

You may have installed new appliances, carpets or blinds. to your older investment property.  These can all be claimed under Div 40.

If you have neglected to claim deductions in previous years, the good new is that you can go back and amend the previous two years to claim missed deductions.

Property Improvements

Not sure, of what may have been done by way of improvements by previous owners?

Our expert quantity surveyors that visit your property have many years experience in both residential and commercial building.

We are able to identify what improvements have been made and when, which enables you to claim the maximum deductions possible

Our Fees

100 percent of our fee for preparing the depreciation schedule can also be claimed against your taxable income in the year of expenditure.

If you have not already done so contact us or us the button below to obtain a fast quote.

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