Tag: BMT Tax Depreciation

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RENO ADDICT

Buy property with friends and increase your tax deductions

The pool

Co-ownership is becoming an increasingly popular trend. Owning a property with others can provide improved purchasing power. This can be particularly useful in capital cities where it can be difficult to break into the property market.

It can also balance out the expenses of owning an investment property including ongoing repairs, maintenance and fees. Additionally, co-ownership can provide improved depreciation deductions, allowing more items to be depreciated at a higher rate. This is where a BMT Tax Depreciation split report can assist.

How does a split report work?

A split report calculates depreciation deductions based on each owner’s percentage of ownership for each asset. This involves splitting the value of the assets based upon each owner’s interest in the assets before applying depreciation rules.

In a scenario where there is just one owner, legislation allows property investors to claim an immediate write-off for assets with an opening value of $300 or less. However, when an investment property is co-owned by two parties with a 50:50 ownership share, a split report allows the owners to each claim an immediate write-off for items where their interest in the asset is below $300. This means the owners can claim an instant write-off for items which are less than $600 in total value.

The same method can be used when applying low-value pooling. Where an owner’s interest in an asset is less than $1,000, these items will qualify to be placed in a low-value pool. This means they can be claimed at an increased rate of 18.75 per cent in the first year regardless of the number of days owned and 37.5 per cent from the second year onwards.

In a situation where ownership is split 50:50, by calculating an owner’s interest in each asset first, the owners will qualify to pool assets which cost less than $2,000 in total to the low-value pool.

Distributing the value of assets based upon the percentage of ownership first will increase the number of assets which investors are eligible to claim an immediate write-off or low-value pooling for. As a result, the rate at which depreciation deductions can be applied will be accelerated and the owners will receive increased deductions in the earlier years of ownership.

BMT’s split reports simplify this process and allow owners to get more from their investment. Each split report can also be provided in CSV format for easy importing into accounting software.

There is an option for owners who prefer a depreciation schedule without any split applied should this be required.

Bradley Beer (B. Con. Mgt, AAIQS, MRICS, AVAA) is the Chief Executive Officer of BMT Tax Depreciation. Click here for more.

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RENO ADDICT

How to choose the right exterior cladding

How to choose the right exterior cladding

So you’ve taken the plunge to renovate or build your new home. After hurdling with Sally Pearson precision through the initial design process, you’re now faced with the almighty decision of how to choose the right exterior cladding. After hours (and hours) of trawling Pinterest, Houzz and every home blog and magazine imaginable, it’s obvious the exterior cladding aesthetic will set the tone and street appeal for your new home. So it better be the right decision, huh?

Boutique Brisbane-based builder James Anthony Construction have compiled a cladding-hit-list of the best, most durable and economical styles so you can feel comfortable in your final selections.

How to choose the right exterior cladding

1. Custom Orb (Corrugated Iron) – Custom Orb by Lysaght is an iconic Australian roof and wall product with many benefits – it’s lightweight, strong and versatile with little-to-no maintenance. It’s favoured by many architects due to its distinct sight lines, both horizontally (as shown) or vertically, and surprisingly suits both traditional and modern architecture like a glove.

How to choose the right exterior claddingTeneriffe House by James Anthony Construction

2. Fibre Cement Sheeting – Fibre Cement Sheeting is one of the most energy efficient and environmentally friendly materials currently on the market. And let’s face it, we all want to be ‘green-thumbed’ when building! This recently renovated home achieves an urban ‘pod feel’ with 6mm Fibre Cement Sheets covered with 42mm Cover Battens which interestingly vary in width – drawing the eye to the right hand side outdoor entertaining area.

How to choose the right exterior claddingChelmer House by James Anthony Construction

3. Timber Chamferboard – In fitting with the Queensland climate and style, original Timber Chamferboard is a very popular solution, especially for cladding heritage homesteads. This home features a thicker than usual 230mm x 20mm board which can be purchased unprimed or primed pending your needs. Note it will need to be maintained every 10-years due to weather for maximum coverage.

How to choose the right exterior claddingRed Hill House by James Anthony Construction

 

4. Glass Paneling – Instead of blocking in the view with solid fixed panels or timber balustrading, consider glass paneling for your extended rooms and outdoor entertaining areas. They allow maximum light and sight lines to the view beyond. These beauties do come with a price tag to match and are required to be cleaned regularly (especially if you have small children). However the end open-plan result is definitely worth the hip-pocket expense!

How to choose the right exterior claddingHamilton House by James Anthony Construction

5. James Hardie, Scyon Axon – ‘Axon’ is one of the popular cladding profiles currently produced by James Hardie. It offers distinct vertically grooved pre-primed panels which look sharp and uniform in any environment. Being a Scyon fibre cement product, it acts as a great insulator plus is durable and lightweight due to the advanced cement composite (keeping your tradies happy and avoiding heavy lifting).

How to choose the right exterior claddingChapel Hill House by James Anthony Construction

This post has been crafted by Gold Coast Interior Designer Nikki Dudley in partnership with Brisbane-based boutique builder James Anthony Construction. All luxury homes featured have been designed by local Brisbane architects Biscoe Wilson & KO&Co, with photography by Kate Mathieson, Anne Langdon and Angus Martin.

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RENO ADDICT

Swimming pool items that make a (tax) splash

swimming pool

Considering installing a pool in your rental property or during your reno? We Aussies are a water loving people but a swimming pool can be a long term expense. If you’re considering adding a swimming pool to your property, either as an owner or as a landlord, it’s important to consider the pros and cons before making the decision.

Let’s take a look at some of the advantages and disadvantages and also outline some of the pool items which attract depreciation benefits for their owners.

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  • Landlords must ensure areas comply with pool safety legislation – Safety is the most important factor landlords must consider if a rental property has a pool. It is important to check the requirements each state has in place to ensure your pool and surrounding areas are compliant to help prevent incidents of drowning or other potential hazards that can occur in and around water. Whilst the rules in each state differ, some things to consider when scrutinising the safety of a pool area include ensuring adequate pool fencing which meets any height guidelines; checking that gates are fitted with a latching device, swing outward from the pool area and are self-closing; have filtration systems which comply with Australian standards and do not use hard covers as safety barriers in place of a fence for spas. Earlier this year, the New South Wales Government also introduced new laws for pool and spa compliance last year from the 29th of April 2016. Those with properties with pools located in this state must obtain a Swimming Pool Certificate of Compliance before properties are sold or leased.
  • Pools increase maintenance and insurance costs – Owners of rental properties must always be prepared to budget for necessary repairs and maintenance costs. However, if a rental property contains a pool the potential costs are generally higher. If tenants are unwilling to keep the pool cleaned regularly, this may mean hiring a cleaner to complete the job to avoid the water turning into a murky algae and leaf filled disaster. As there is an increased chance of accidents occurring in properties which contain pools, insurance expenses are also likely to be higher, so investors must factor this into their budget. It isn’t all bad news though. Investors are able to claim the costs of repairs, maintenance and insurance in the year the expense is incurred when they visit their Accountant.
  • Pools may not necessarily add value or increase rent – Whilst pools sound like appealing features, they don’t necessarily add value to a property or help to attract potential tenants. In fact, oftentimes they can be seen as a hassle and even dangerous, particularly if tenants have a young family. A recent survey of more than 1,000 Australian homebuyers by finder.com.au found that swimming pools were the seventh most desirable feature in a home. More desirable items on the list included air-conditioning, a garage or carport area, a backyard or garden, solar panels, a deck or pergola and a dishwasher. Needless to say, pools can be a hit or a miss and research suggests that investors should only consider buying a property with a pool or renovating to add one if it is located in the right suburb. This is because pools are far more likely to receive use in areas with warmer climates. Investors need to consider the fact that during winter and cooler months, pool areas will often go unused which can result in the condition of the area deteriorating. Should a rental property become vacant at the wrong time, this could make it less attractive to rent to potential tenants.
  • Depreciation benefits – One of the biggest benefits of renting a property with a pool is the depreciation deductions the owner will be eligible to claim. Investors who are aware of their eligibility to claim depreciation deductions often focus on the building itself and the assets contained inside. However, outdoor items and structures are also depreciable due to the wear and tear that occurs over time. The following graphic provides examples of some of the structural items which can be claimed as a capital works deduction and some of the easily removed assets which can be depreciated as plant and equipment.swimming pool

As you can see, items in the pool area create a $2,8746 splash of deductions in the first financial year alone for the owner of the above property. Fixed items such as the in-ground pool, slide, diving board, spa, pool fence and pool house resulted in $1,577 in capital works deductions in the first financial year for the owner. Easily removable plant and equipment assets such as the furniture, pergola, couch, outdoor lights and the pool filter and pump resulted in $1,297 in depreciation deductions for the owner in the first year.

Bradley Beer (B. Con. Mgt, AAIQS, MRICS, AVAA) is the Chief Executive Officer of BMT Tax Depreciation.

For more details on how BMT can help you, visit www.bmtqs.com.au

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RENO ADDICT

How to find hidden value in your next investment property

How To Find Hidden Value In Your Next Investment Property

If you’re on the hunt for your next investment property, don’t discount the ‘diamonds in the rough’ AKA existing properties that may not be a brand new build.

While brand new properties are always an attractive option, providing investors with optimal depreciation claims through higher capital works deductions and plant and equipment assets, older properties can still provide substantial deductions, many of which may be hidden beneath the surface. How To Find Hidden Value In Your Next Investment Property

Continue reading “How to find hidden value in your next investment property”
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RENO ADDICT

Depreciation for renovations made simple

Investment property owners often miss out on thousands of dollars due to two main reasons:

  • They don’t know what depreciation entitlements they can claim for renovations or refurbishments to their investment property
  • They don’t use a qualified quantity surveyor to prepare a tax depreciation schedule.

Follow the steps below to ensure your tax depreciation schedule is right the first time around.

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Understand scrapping

Scrapping refers to the removal and disposal of any potentially depreciable asset from an investment property. When worn or old assets (like carpet and hot water systems) are replaced and scrapped, the owner of the property may be entitled to claim the remaining depreciable value for the items being removed as a tax deduction in that financial year.

Get a “before renovation” tax depreciation schedule

Arranging a tax depreciation schedule before completing renovations will save you time and money when making a claim. In case of an audit by the Australian Taxation Office (ATO), a valuation of all items in a property, as well as adequate photographic records is required.

Get an “after renovation” tax depreciation schedule

A second schedule is prepared after completion of the renovation, identifying the value of all new plant and equipment and capital expenditure within the property. The adjustments will be made to your tax depreciation schedule for a small adjustment fee and should not cost you as much as the initial tax depreciation schedule. The new schedule will outline all the depreciation claims available for the life of the property (forty years).

Only deal with a credible provider of tax depreciation schedules

BMT Tax Depreciation is a leading provider of ATO compliant and comprehensive tax depreciation schedules. The qualified team at BMT meticulously prepare and customise each and every depreciation schedule, ensuring that owners maximise the deductions they are entitled to. Scrapping is a complicated process that requires the expertise of a specialist quantity surveyor in conjunction with an accountant. By requesting a tax depreciation schedule you know you’re not going to miss out on anything and your accountant will love you for it.

–Bradley Beer (B. Con. Mgt, AAIQS, MRICS) is the Chief Executive Officer of BMT Tax Depreciation.  Click here  for more.

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Bathrooms Kitchens RENO ADDICT

Shower yourself with $2,210 in bathroom and laundry deductions

When it comes to depreciation, the bathroom and laundry areas of a rental property contain some of the items most often missed by investors when claiming deductions.

While shower curtains and bathroom accessories such as toilet brushes, soap dispensers and hampers have relatively low depreciable values, it is items like these which can provide property investors with returns straight away.

Items contained in an investment property which have a depreciable value of less than $300 can be deducted as an immediate write-off in the first financial year after their acquisition. These plant and equipment assets experience wear and tear quickly so investors may also choose to update them frequently. This can become costly for an investor if they are not maximising their deductions and claiming them correctly.

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Similarly, low-cost assets which have a value below $1,000 when first purchased and low-value assets which cost more than $1,000 in the year of acquisition, but remaining deductions after the first year’s claim are below $1,000, are eligible to be added to a low-value pool. Pooling is a method by which plant and equipment items will be depreciated an increased rate of 18.75% in the first year and at a rate of 37.5% from the second year onwards.

Items which have a relatively low value add up and while bathrooms and laundries are not the only rooms in a rental property where these low cost items are found, it is a place Quantity Surveyors frequently spot them when completing a detailed site inspection.

To examine this further, let’s take a look at some of the deductions a specialist Quantity Surveyor found for a rental property owner in the shared bathroom and laundry area of their property.

In the first five cumulative financial years, the owner of this investment property can claim $2,210 in deductions from their shared bathroom and laundry area alone.

Plant and equipment assets commonly found in a bathroom such as the shower curtains, the hamper and bathroom accessories such as the tooth brush and soap holders all had low depreciable values of $30, $40 and $80 respectively. As these items all were beneath the $300 threshold, the investor could claim an immediate write-off for these items in the first financial year claim.

The washing machine on the other hand was found to have a depreciable value of $1,250. As this value does not meet the criteria for an immediate write-off or the low-value pool in the first or second year, the item must be depreciated based on an individual rate and effective life enforced by the Australian Taxation Office (ATO). However, after the first two year claims have been made the item will fall below the $1,000 threshold and the investor can then claim the remaining years at the increased low-value pool rate of 37.5%. This means, that within five years, an investor can claim $1,055 in deductions for the washing machine alone.

Clothes dryers are another common asset found in the laundry of an investment property which these same rules may apply to, depending on the depreciable value of the particular dryer found on close inspection. This is a good reason to have an expert assess the items in your property for you. A specialist Quantity Surveyor will ensure the maximum deductions for each item found within an investment property are valued and calculated correctly using the depreciation rules available.

Capital works deductions for items found in the bathroom of an investment property pertain to the structural and fixed items. Examples include the bath, tiles, sink, taps, cupboards, the shower and towel rails. Depreciation for these items will be calculated at a rate of 2.5% over forty years so long as construction commenced within the legislated dates enforced by the ATO. In the first five years, the capital works deductions found in the bathroom alone for this investor cumulate to $1,005. The results will multiply as all of the rooms within the property will have depreciation deductions available.

To maximise depreciation benefits, ask for the advice of a specialist Quantity Surveyor and obtain a depreciation schedule. The difference it can make when completing your annual income tax return and the cash flow benefit are well worth making an enquiry.

–Bradley Beer (B. Con. Mgt, AAIQS, MRICS) is the Chief Executive Officer of BMT Tax Depreciation. Bradley joined BMT in 1998 and as such he has substantial knowledge about property investment supported by expertise in property depreciation and the construction industry. Click here for more. 

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Outdoor & Exteriors RENO ADDICT Shopping

Outside there’s $3,491 more in deductions to be claimed

As summer brings warmer weather to our backyards, it is a great time for property investors to think about the outdoor areas of their investment properties.

Outdoor areas in investment properties contain a number of structures and assets which are worth thousands of dollars for their owners. These items also experience wear and tear over time. The Australian Taxation Office (ATO) allows owners of income producing properties to claim this wear and tear as a depreciation deduction when completing their annual income tax assessment with an accountant.

Before an investor can claim depreciation, it is recommended they consult with a specialist quantity surveyor to arrange a tax depreciation schedule for the property. A tax depreciation schedule will outline all of the deductions available for the structure of the property as well as the plant and equipment assets contained both inside and outside of the property.

The deductions a specialist quantity surveyor outlines on a depreciation schedule are split into two types. Structural items will be classified as capital works deductions, while assets which can be easily removed from the property can be claimed as plant and equipment depreciation.

Items classified as capital works will depreciate at a rate of 2.5 per cent each year over forty years. Plant and equipment assets, on the other hand, each have an individual effective life as set by the ATO.

The following graphic shows some of the depreciable plant and equipment assets and structural items found within the yard of an investment property as well as the first year depreciation deductions an investor could claim for these items.

bmt

Examples of outdoor structures which depreciate, as shown in the graphic, include the in-ground swimming pool, pool fencing, shade sails, pavers and window awnings. Other common structural assets found in the yard which depreciate include concrete slabs, clothes lines and sleepers.

Depreciable plant and equipment assets found in the yard of the pictured property included solar garden lights, outdoor furniture, garden watering systems, swimming pool filters and chlorinators. Other common examples of depreciable plant and equipment assets which might be found in the yard include garbage bins, garden sheds and freestanding barbeques.

As the assets outside a property experience wear and tear, it also makes sense to check in regularly with your property manager to see if there are any necessary repairs and maintenance required. If there are, it is also best to check with your specialist quantity surveyor before completing any work to the property.

While work completed to repair damage (such as mending part of a fence) or to prevent deterioration to a property (for example oiling a deck) is able to be claimed as an immediate deduction in the year of the expense, any work which improves the condition or value of an object beyond it’s original state at the time of purchase will be considered a capital improvement. Capital improvements completed will also be classified as either capital works deductions or depreciated as plant and equipment using the asset’s individual effective lives.

If an investor already has a depreciation schedule and plans to complete improvements to the yard, a specialist quantity surveyor can provide information on any remaining deductions for items planned for removal. Removing items could entitle an investor to claim additional deductions using a process known as ‘scrapping.’ Using this process, any remaining depreciable value can be claimed as a deduction in the financial year the item is removed.

When any new structural additions or plant and equipment assets are added to an investment property, it is recommended to ask your specialist quantity surveyor to provide an updated depreciation schedule outlining the deductions for any new items.

Maximising depreciation deductions for items outside a property and carefully considering whether any improvements can be made can add thousands of dollars to an investor’s pocket. It also can add additional value to the property and appeal to tenants, helping to increase your rental return.

Quantity surveyors can provide a free estimate of the depreciation deductions available in any investment property. To request an estimate and obtain their advice, click here.

— Bradley is the chief executive officer of BMT Tax Depreciation. Bradley joined BMT in 1998 and as such he has substantial knowledge about property investment supported by expertise in property depreciation and the construction industry. 

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Outdoor & Exteriors RENO ADDICT

How to earn money from your granny flat

The rise in popularity of granny flats can be attributed to two things: in part state-level legislative changes regarding secondary dwellings which aim to boost housing affordability in capital city areas and also because of their affordability and capacity to achieve high rental yields. Data from our depreciation schedules suggest that while the average granny flat will cost $121,000 to construct, the owners can usually achieve a 15% rental yield on this investment.

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In order to maximise the benefit of this yield, it is important for granny flat owners to understand their depreciation entitlements. When a secondary dwelling is income-producing the owner is entitled to substantial deductions due to the wear and tear of the building structure and the plant and equipment assets contained, even if they are currently occupying the primary residence on the property.

Research conducted by BMT Tax Depreciation has shown that the average first year depreciation deduction for a granny flat is $5,288, accumulating to $23,713 in deductions over the first five years of ownership. Shared areas between the granny flat and owner-occupied property such as patios, pools and barbecues may also entitle the owner to additional depreciation deductions, claimed based on the tenant’s usage percentage.

As each state or territory provides their own legislative requirements, including the land and plot sizes of a secondary dwelling or granny flat, the table below provides a summary to assist investors and also outlines the average first year depreciation deductions which can be found for properties of these sizes.

2015_T002 ~ Granny Flats
*The first year deductions in this example are based on an average claim for a property of this size. ** Deductions based on a 60m2 plot size. ***In QLD, VIC and SA granny flats cannot be used as income producing secondary dwellings.

Investors who are evaluating the cash flow potential of constructing a granny flat or a secondary dwelling on their property for rental purposes should speak with a specialist quantity surveyor for advice. They will be able to provide an estimate of the depreciation deductions which will become available once the property is available for rent. It is also recommended to speak with an accountant for advice on any of the capital gains tax implications of investing in a granny flat as there are a number of factors investors should be aware of if they ever decide to sell their home or subdivide the property later down the track.

Those who already own and rent a granny flat or secondary dwelling should also obtain a tax depreciation schedule from a specialist quantity surveyor which outlines the depreciation deductions they will be able to claim when they visit their accountant to perform their annual income tax assessment.

To learn more about tax depreciation for any investment property, visit the BMT Tax Depreciation website. Alternatively, for obligation free advice, contact one of the expert staff at BMT Tax Depreciation on 1300 728 726.

– Bradley Beer is the managing director of BMT Tax Depreciation. A depreciation expert with over 16 years experience in property depreciation and the construction industry.

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RENO ADDICT

Depreciation differences: old versus new residential properties

Property depreciation is a non-cash tax deduction available to the owners of income producing properties. As a building gets older, items wear out – they depreciate. The Australian Taxation Office (ATO) allows property owners to claim this depreciation as a tax deduction. Depreciation on mechanical and removable plant and equipment items such as carpets, stoves, blinds, hot water systems, light shades and heaters are all valid deductions. There are also deductions available for the wear and tear of the structural elements of a building, commonly called a capital works deduction.

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Investors often wonder about the depreciation potential of older properties compared to new properties. The simple answer is that the owners of newer properties will receive higher depreciation deductions. However, all investment properties both new and old can attract depreciation deductions for their owners.

Newer properties have newer fixtures and fittings, so the starting value of those items is higher, resulting in higher depreciation deductions. The same applies to the capital works deduction. 2.5% of the structural costs of a building can be claimed per year for forty years. Construction costs generally increase over time, making building write-off deductions on new buildings higher.

Owners of older properties can claim the residual value of the building up to forty years from construction. For example, if an investment property is five years old, the owner will have 35 years left of capital works deductions to claim.

Capital works deductions are governed by the date that construction began. If a residential building commenced construction before the 15th of September 1987, there is no building write-off available. Investors who own properties that are built before this date will still be able to make a claim on the fixtures and fittings within the property and include any recent renovations, even if the renovation was carried out by a previous owner.

It is always worth getting advice about the depreciation potential of a property regardless of age. The deductions are not as high on older properties but there are usually enough deductions to make the process worthwhile.

The table below shows the difference a depreciation claim can make for the owners of new, old and recently constructed residential houses.

2015_T004 Old older new houses
The depreciation deductions in this case study have been calculated using the diminishing value method.

As you can see, although the owner of a newer residential house constructed after 2012 will receive much higher deductions, the owner of an older house constructed in 1980 will still receive substantial deductions. In the first financial year alone they can claim $3,298 in deductions and over five years deductions total to $12,357.

To obtain a free estimate of the deductions available in any investment property or for obligation free advice, investors can contact one of the expert staff at BMT Tax Depreciation on 1300 728 726.

– Bradley Beer is the managing director of BMT Tax Depreciation. A depreciation expert with over 16 years experience in property depreciation and the construction industry.

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RENO ADDICT

The great division: division 40 versus division 43

In order to maximise property depreciation deductions, it is important to understand the difference between division 40 and division 43 regulations. These two main pieces of legislation affect rates at which assets can be written off and claimed. Knowledge of the difference between division 40 and division 43 assets can assist in ensuring that deductions are maximised. This is particularly important when planning to replace any existing structures or items contained within an investment property.

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Division 43
Otherwise known as ‘capital works allowance’ or ‘building write-off’ – division 43 is a deduction available for the structure of the building and the items within it that are deemed irremovable.

Division 43 can be claimed at a rate of 2.5% over 40 years. However, not all properties qualify for this allowance. As a rule, any residential property in which construction commenced prior to 15 September 1987 will not qualify. There are exceptions to this rule when renovating. Any renovations completed after the legislated dates set by the Australian Taxation Office (ATO) may also entitle an investment property owner to deductions, even if the renovations were completed by a previous owner of the property.

Division 40
Also known as ‘plant and equipment’, these are the removable assets found within an investment property. Examples of division 40 items which owners can claim depreciation deductions for include lights, blinds and ceiling fans.

These assets depreciate according to an individual effective life and therefore at a much faster rate than structural items. For example, in residential properties carpet can be claimed at a rate of 20% over 10 years (using the diminishing value method).

Owners of all investment properties, regardless of the property’s age, are eligible to claim deductions for these assets.

Common mistakes investors can make by incorrectly categorising items

It is easy for investors to incorrectly allocate deductions for items by not seeking expert advice. Particular assets can cause great confusion as some assets will qualify in part for division 40 deductions and partly for division 43 deductions. For example an air conditioning unit falls under division 40 whilst the ducting for the same unit falls under the division 43 allowance. Similarly, an in-ground pool falls under the division 43 allowance whilst the pumps for the pool fall under division 40.

In order to ensure your deductions are maximised within the ATO guidelines, it is essential to have a specialist quantity surveyor visit the property and complete a site inspection which lists all assets and outlines the deductions correctly.

What to be aware of when renovating

Understanding the depreciation rates of different items can help owners to make informed decisions when renovating.

Investors can make their choices to install items which will improve deductions and depreciate at a faster rate. For example carpet (division 40) depreciates at a faster rate than tiles (division 43); blinds (division 40) depreciate faster than wooden louvres (division 43) and ornamental lighting (division 40) depreciates faster than down lights (division 43).

The advantage of replacing division 40 assets is that the owner can depreciate these items within a shorter time period depending on the assets individual effective life, potentially resulting in the full depreciable value of the asset being claimed and providing the maximum deductions to the owner within just a few years.

It is also important to be aware that removing assets can affect both division 40 and 43 deductions. Any removed assets could entitle their owner to additional claims. If there is any remaining depreciable value for assets being removed, this residual value can be claimed as a 100% tax deduction in the same financial year as the items disposal.

A depreciation schedule should be arranged both before and after a renovation to capture both existing assets which are planned for removal and any new assets installed by the property owner. A specialist quantity surveyor will complete a depreciation schedule which allows owners to claim the maximum deductions possible.

Case study:

David purchased an existing house one year ago. The property was approximately fifty years old and was acquired as an investment.

After BMT Tax Depreciation conducted a detailed site inspection and noted the eligible plant and equipment, a depreciation schedule was prepared. The schedule identified $15,000 worth of depreciating assets.

Whilst the property was income producing, David claimed a total of $2,700 in deductions in his first financial year.

David decided it was time to build a new investment property on the site. In doing so the existing building was demolished and removed from site. The residual depreciable value of $12,300 became an immediate 100% deduction in the year of demolition.

The following shows some examples of division 40 and division 43 items found inside and outside of a normal home.

2014_TAJ1---Bedroom-&-bathrrom-infographic

Be sure to obtain a tax depreciation schedule from a reputable quantity surveying firm to maximise your depreciation claim. For obligation free advice for any property on the deductions available for both division 40 and division 43 assets, speak with one of the expert staff at BMT Tax Depreciation on 1300 728 726 today.

– Bradley Beer is the managing director of BMT Tax Depreciation. A depreciation expert with over 16 years experience in property depreciation and the construction industry.

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RENO ADDICT

How to save money by claiming tax deductions on furniture in a rental property

Often property investors rent out their property fully furnished. Depreciating furniture can add thousands of dollars to the owner’s depreciation claim.

The below table provides an example of the difference that claiming depreciation on a $16,000 furniture package could make to an investor who purchased a two-bedroom two-bathroom unit:

2014_TQ1 - Without and Without Furniture

It is important that a specialist quantity surveyor prepares a tax depreciation schedule for an investment property before the owner lodges their tax return. A quantity surveyor will carry out an inspection on the property to identify more plant and equipment items and apply depreciation legislation to maximise depreciation deductions for the owner.

BMT Tax Depreciation complete reports for over 10,000 accountant referrals each year, with reports showing an average of $5,000 to $10,000 as a first full year deduction.

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For further information on depreciation, property investors can visit BMT Tax Depreciation’s What is Depreciation page.

– Bradley Beer is the managing director of BMT Tax Depreciation. A depreciation expert with over 16 years experience in property depreciation and the construction industry.

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Outdoor & Exteriors RENO ADDICT

How to save money by claiming deductions on what’s outside

When it comes to claiming depreciation on investment properties, many investors are unaware of the deductions available on outdoor structures, fixtures and fittings.

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Items outside a building can add value to a property. Rather than ignoring the street appeal, investors can include items in the yard or outdoor area to help attract potential tenants. The investor can then maximise their deductions by claiming depreciation on the eligible items in the front yard, backyard and on the balconies of their properties.

Deductions can be claimed on these outdoor assets as either capital works allowance or plant and equipment depreciation.

Capital works allowance, also known as building write-off, is based on the historical cost of a structure, excluding the cost of plant and non-eligible items. Outdoor structures which qualify for the capital works allowance include:

BMT Tax Depreciation ~ Outdoor Appreciation Increases Depreciation ~ 09.12

Plant and equipment items, including removable or mechanical assets, are also eligible for depreciation deductions. Each plant and equipment item has an effective life set by the Australian Taxation Office.

The depreciation available on each item is calculated using the effective life. Some depreciable outdoor plant and equipment items commonly found outside a property include:

BMT Tax Depreciation ~ Outdoor Appreciation Increases Depreciation ~ 09.12 (2)

Assets outside a property can be worth thousands of dollars. Investors should take special notice when old assets including retaining walls, garden sheds and driveways are removed and replaced during a renovation. They may be entitled to claim 100% of the unclaimed value as a deduction. A specialist quantity surveyor is qualified to calculate values and construction costs of these items and can ensure that investors are not throwing dollars away.

— Bradley Beer is the managing director of BMT Tax Depreciation. A depreciation expert with over sixteen years experience in property depreciation and the construction industry.

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Claiming tax back on investment properties: the basics

Property investors often worry about ongoing repairs and maintenance costs, however these concerns can often be reduced by claiming back these costs when completing a tax return. Before claiming deductions, it is necessary for investors to understand the difference between claiming repairs, maintenance and capital improvements.

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Repairs

The Australian Taxation Office (ATO) defines repairs as work completed to fix damage or deterioration of a property, for example replacing part of a damaged fence. A deduction cost paid to repair a rental property can be claimed as an immediate 100% deduction in the year the expense is incurred.

Maintenance

Maintenance is defined as work completed to prevent deterioration to a property, for example mowing the lawns. Costs for maintenance of a rental property can also be claimed as an immediate deduction in the year the expense is paid.

Capital improvements

Improving the condition or value of an item beyond its original state at the time of purchase is defined as a capital improvement. These are classified as either capital works deductions or plant and equipment and must be depreciated over time. Capital works deductions include renovations such as adding an internal wall and also include items which cannot easily be removed from the property. Plant and equipment items include removable items such as carpet and hot water systems.

– Bradley Beer is the managing director of BMT Tax Depreciation. A depreciation expert with over sixteen years experience in property depreciation and the construction industry.