Getting cash back for landlords
Only 20 per cent of property investors lodge a claim for depreciation at tax time, according to Scott Brunsdon, general manager of Depreciator.
He says many people are unaware that it is even possible; some believe it only applies to new properties, while others assume their accountant is responsible for working out their tax depreciation schedules.
Depreciation can also apply to any renovations carried out by a previous owner, as long as the work was carried out after February 26, 1992.
In addition, it is possible to back-date a tax depreciation schedule for up to four years to claim any lost tax benefits.
Currently, the Australian Taxation Office (ATO) provides a list of all those items for which depreciation can be claimed.
“There are over 1,500 items, everything from stuffed crocodiles to household appliances,” Brunsdon adds.
For those completing a depreciation schedule for the first time, there are a number of factors to consider.
First, it is important to know the difference between a repair and a replacement.
“For example, fixing leaking roof tiles would be defined as a repair, but replacing the entire roof would be considered an improvement and probably needs to be depreciated,” Brunsdon says.
Second, if you own an investment property for 12 months, you may qualify for a capital gains tax discount of 50 per cent.
Property investors are also entitled to claim for travel, vehicle and accommodation expenses that relate directly to the management of their investment property. This may also include the cost of attending any seminars relating to the management of rental properties.
Brunsdon also suggests that to save on tax, couples being taxed at different rates should consider holding their investment property in the name of the spouse who will benefit most from any deductions.
However, investors need to be aware that any strategy like this could have an impact on rebates and family tax benefits.
Finally, the cost of landlord’s insurance is also considered tax deductible by the ATO.
Recommended for you
With the final tally for FY25 now confirmed, how many advisers left during the financial year and how does it compare to the previous year?
HUB24 has appointed Matt Willis from Vanguard as an executive general manager of platform growth to strengthen the platform’s relationships with industry stakeholders.
Investment manager Drummond Capital Partners has announced a raft of adviser-focused updates, including a practice growth division, relaunched manager research capabilities, and a passive model portfolio suite.
When it comes to M&A activity, the share of financial buyers such as private equity firms in Australia fell from 67 per cent to 12 per cent in the last financial year.
