This week we have sought expert advice from our friends at BMT Tax Depreciation for tips on how to boost earning potential when it comes to your investments:

Property investors can claim thousands of extra dollars on a property by maximising depreciation deductions.

According to the Managing Director of BMT Tax Depreciation, Bradley Beer, research suggests 80% of property owners are missing out on thousands of dollars in property depreciation deductions which can mean the difference between turning a negative cash flow investment into a positively geared asset.

“When looking at units, an investor could potentially claim between $5,000 to $10,000 in depreciation deductions in the first full year,” says Bradley.

This is no small amount, so for an investor wondering what property depreciation is and how they can go about making a claim, we’ll explain.

Depreciation is a non-cash deduction that the Australian Taxation Office (ATO) allows the owner of any income producing property to claim due to the wear and tear over time to the building structure and the plant and equipment assets contained with the property. It is described as a non-cash deduction because the investor does not need to spend any money to be eligible to claim it.

“All investment property owners can claim depreciation, however higher depreciation deductions are usually available on newer properties,” said Bradley.

Owners of new properties are eligible to claim the full deduction on the entire cost of the building structure over forty years. Owners of properties which are not brand new can claim the remaining years.

There are also deductions available for the plant and equipment assets contained within the property, such as stoves, carpets, blinds and air-conditioning units. Deductions for these assets are not dependent on their age, rather the condition and quality of each asset. Plant and equipment assets depreciate based on an individual effective life set for each asset by the ATO.

“Including removable plant and equipment assets can substantially increase the depreciation deductions available for a property investor” said Bradley.

Units generally contain more depreciable plant and equipment. If a unit is new, these assets will generally have a higher value, which will increase the depreciation deductions that will be available for the owner.

In some states, owners of units can also claim a proportion of common property areas within the complex or development that are shared, such as driveways, pools, pool pumps, fire protection equipment and lifts.

To ensure depreciation deductions are maximised this end of financial year, investors are recommended to contact a specialist Quantity Surveyor such as BMT Tax Depreciation. They can compile a tax depreciation schedule outlining all of the deductions available for the life of the property (forty years).

As part of the process of completing this schedule, a depreciation expert will perform a site inspection and take photos of all plant and equipment to ensure no depreciable assets are missed. They will also use their expert knowledge of current depreciation legislation to select the best methods to calculate depreciation to maximise the claim for the owner.

The fee for a depreciation schedule is 100% tax deductible. Investors who arrange a depreciation schedule prior to the 30^th of June can also claim the cost of the schedule when they complete this year’s annual income tax assessment with their Accountant.

For a free over the phone assessment of the likely deductions for any investment property, please contact one of BMT’s professional staff on 1300 728 726.

Article provided by BMT Tax Depreciation.

Bradley Beer (B. Con. Mgt, AAIQS, MRICS) is the Managing Director of BMT Tax Depreciation. Please contact 1300 728 726 or visit www.bmtqs.com.au for an Australia-wide service.