Tax season can be overwhelming for many people, yet for property investors, it offers a chance to regain a portion of the expenses related to owning and managing an investment property. By implementing effective strategies and optimising deductions, investors can benefit greatly when it comes to filing their tax returns. 

Here are BMT Tax Depreciation’s tips for maximising depreciation tax deductions.

1.    Don’t overlook depreciation

Depreciation is the natural wear and tear of an income-producing property and the assets within it. Depreciation is claimable on the building’s structure and permanent assets as well as the easily removable and mechanical assets.

Depreciation is the second largest tax deduction available to property investors after investment loan interest, yet it is commonly missed. Additionally, no cash needs to be outlaid to claim depreciation. 

In FY 2021/22 BMT Tax Depreciation found residential clients an average deprecation claim of almost $10,000 in the first full financial year. 

2.    Enlist the services of a specialist quantity surveyor 

The first step to claiming depreciation is ordering a tax depreciation schedule.

A quantity surveyor specialising in tax depreciation will ensure that the maximum deductions are identified while maintaining Australian Taxation Office (ATO) compliance. 

A BMT Tax Depreciation Schedule outlines all the depreciation deductions an investor can claim for their investment property. It lasts for forty years and the fee for preparing it is 100 per cent tax deductible.

3.    Amend previous tax returns

Investors can amend two of their prior tax returns in order to recover any deductions that were previously overlooked or missed. This allows them to rectify any errors or omissions made in their tax returns by claiming the deductions they’re entitled to.

Claiming back missed deductions is not difficult, but it requires proper documentation for an accountant to ensure accurate processing and substantiate any retroactive claims. This highlights the significance of a tax depreciation schedule, as it serves as a crucial tool for maintaining records and supporting any claims that need to be made. By having a tax depreciation schedule in place, investors can effectively streamline the process and ensure that all missed deductions are appropriately addressed.

4.    Claim partial year deductions

The ATO allows investors to  claim depreciation based on the number of days a property was available for lease. This could occur if an investor has not owned an investment property for a full financial year, or they use their home as a holiday rental for part of the year. 

5.    Use techniques that maximise deductions sooner 

There are depreciation rules and pools which allow property investors to claim tax deductions sooner, such as low-value pooling. A specialist quantity surveyor can determine which assets qualify for accelerated depreciation. 

6.    Claim for repairs, maintenance and renovations 

Different rules apply to claiming repairs and capital improvements. The full cost of repairs can be claimed in the same financial year they are completed. An improvement, on the other hand, is when the condition of an item or property is improved beyond that of when it was purchased. Such improvements are capital in nature and must be depreciated over time. 

It’s common for renovations to be completed by a previous owner which qualify for deductions for forty years from the construction completion date. This is why site inspections are important as only a trained eye, such as a quantity surveyor, can identify deductions and correctly estimate construction costs for depreciation. 

BMT Tax Depreciation conducts physical site inspections to ensure every available deduction, including previous renovations are identified and claimed accordingly. 

Investors seeking to maximise the depreciation deductions within their investment property should call BMT on 1300 728 726 to have a chat or Request a Quote. 

The information provided in this article is of general use only and should not be used as a quote or advice. BMT recommend consulting an accountant before making financial decisions. Contact BMT for a specialised tax depreciation schedule. 

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