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Do you have an investment property, or are thinking about getting one? If so, read on…
The two main reasons people invest in property outside of their home are:
1. Capital growth (increasing your assets)
2. Reducing tax
Whilst in most cases we can’t directly control the way a certain area or individual property appreciates, there is one way to maximize the tax you save when owning an investment property, and that is to have a depreciation schedule.
What is a depreciation schedule?
A depreciation schedule is a report (completed by a professional quantity surveyor), that outlines all the items you can claim as a tax deduction on your investment property.
Generally, the report breaks down the items into 2 main areas:
- Capital – the things like bricks, wood, tiles & concrete
- Equipment – air conditioners, blinds, carpet, appliances
If your investment property is providing your income, a portion of each of things listed above can be claimed as a deduction on your tax return (speak to one of our tax experts if you want a deeper explanation). It is exactly like how many people claim wear and tear on vehicles used work purposes, except in the case of property, it is the equipment and capital items (listed above) that the wear and tear occurs on.
Do I need a depreciation schedule?
Simply put, if you have an investment property, the answer is YES.
When should I get a depreciation schedule?
As soon as you purchase the property that is to be an investment is best practice, but we often see benefits for investors even if they have already owned the property for a period of months (or years).
How much tax will I save?
There are too many variables for us to guess, but some of the key factors which improve tax saved;
- Is the property newly constructed?
- Have you recently renovated?
- Are the appliances and materials high quality
How much does a depreciation schedule cost?
The cost of a depreciation schedule can often be between $750-1,000, but one of the benefits is that the fee paid for the schedule can be wholly deducted in your next tax return.
We do have a relationship with Depreciator, who provides Rising Tide clients with a discount on their depreciation schedules at a discounted rate (We don’t take any kickbacks!).
If you are unsure about depreciation, we would recommend getting on the front foot and discussing your individual situation with a specialist in the depreciation schedule space.