Depreciation saves investors thousands of dollars each and every year. It’s the only non-cash deduction available, meaning they never need to spend anything to claim it. 

BMT Tax Depreciation provide specialist depreciation advice and schedules to property investors across the country. With their experience spanning over twenty years and 700,000 schedules, BMT has shared the top three common depreciation mistakes that they see every day.

Mistake 1 – believing the property is too old

Almost all investors that purchased their property second-hand during or after 2017 automatically rule out depreciation. This is due to legislation that makes some second-hand plant and equipment assets ineligible for depreciation deductions. 

These investors shouldn’t rule depreciation out so easily. In fact, BMT still find thousands, sometimes tens of thousands, in depreciation deductions on second-hand properties. 

Second-hand property owners can still claim all eligible capital works deductions on the structural component of the property. On average, capital works make up 85 to 90 per cent of total depreciation claims.

They can also claim any new plant and equipment assets they have purchased for the property. 

Mistake 2 – DIY schedules

‘Do it yourself’ schedules can save investors a few hundred dollars at the start but can cost them thousands in the long run.

This is because deductions can be easily missed by the untrained eye, and costly errors can be made. If items are claimed incorrectly the owner can face serious consequences.

A common example of this happens with a property’s lighting. Regular lighting such as light shades are plant and equipment assets, with an effective life of five years and hold a diminishing value rate of 40 per cent. It may be fair to assume that all lighting falls in this category, but this isn’t always the case. 

Down lights are classed as capital works, so they have an effective life of forty years and depreciation rate of 2.5 per cent. Making the mistake of claiming downlights as plant and equipment deductions will come under Australian Taxation Office scrutiny. 

Mistake 3 – ruling out partial year

Given that depreciation can only be claimed per financial year, many think that a property must be leased for a full year before claiming depreciation. 

However, many can still claim partial year deductions. A specialist quantity surveyor can prepare a tax depreciation schedule using pro-rata calculations. This means that if the investor only owns the property for a few months within a financial year, depreciation can be claimed. 

BMT has seen partial year deductions boost cash flow by thousands. Not only are pro-rata calculations available, the investor can take advantage of the low-value pool and immediate deduction in the first partial year of ownership. 

Investors can avoid mistakes with the depreciation specialist

A tax depreciation schedule lasts for the lifetime of the property, so it’s important to get it right from the very start. Investors that engage a specialist avoid any depreciation mistakes. 

For over twenty years, BMT Tax Depreciation has been the leading depreciation specialist in the country. Their specialist staff are located Australia wide and prepare tax depreciation schedules for all types of investment properties. 

Contact BMT today on 1300 728 726 or Request a Quote. 

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