BMT Tax Depreciation CEO Bradley Beer says substantial claims are available – but not everyone is taking advantage. Photo: BMT Tax Depreciation.
Many ACT property investors are unwittingly missing out on thousands of dollars in tax deductions every year – and at the centre of it is a depreciation schedule.
The document outlines how much wear and tear an investment property has on the structure, fixtures and fittings over time and how much of that loss can be claimed as a tax deduction.
Depreciation is the second-biggest tax deduction available to property investors. In Canberra, the average first-year depreciation deduction is an eye-watering $11,408. Over five years, that jumps to $47,953; and over the life of the property, a staggering $316,783.
“Due to the type of properties in Canberra, many of which are newer and built with higher finishes, ACT property investors claim over 15 per cent more in depreciation deductions than the national average,” BMT Tax Depreciation CEO Brad Beer says. “There is a substantial amount of cash available to investors.”
Deductions aren’t just for those with extensive portfolios. The majority of BMT clients are mum and dad investors, who don’t deal in the economics of property every day. That’s where quantity surveyors come in.
These experts assess construction costs – from concrete to cabinetry – and estimate how much of the building’s value can be depreciated. The Australian Taxation Office (ATO) accepts their estimates, allowing owners to claim legitimate deductions with confidence.
Despite the benefits, many investors wrongly assume their properties aren’t eligible.
“There’s a common misconception that second-hand properties don’t qualify for depreciation,” Brad says. “But in fact, many second-hand properties still hold beneficial depreciation deductions in the form of capital works, which make up 85 to 90 per cent of a depreciation claim.”
Even renovations completed by previous owners can add value to a depreciation claim.
“If you’re renovating, you’re spending on things that are new and that will depreciate,” he says.
“When you do a renovation and throw things away, there may have been depreciation value left on those things. It’s worth finding out if there are any instant deductions available for that. Call us before ripping anything apart.”
If you’ve never looked into depreciation, it’s not too late. Investors who missed deductions in the past can often amend up to two years of previous tax returns.
Whether you’re looking at back payments or depreciation going forward, the process is relatively simple. BMT begins with a short conversation to determine whether deductions are worth pursuing.
“We can identify quite quickly whether you have a claim,” Brad says.
“We can get most of the information we need online, and while some quantity surveyors say they can just do it off the photos, we find visiting the property is an important part of the process to make sure we capture everything there. Sometimes things can be missed otherwise, like renovations.
“In fact, BMT found 66 per cent of investment properties had some form of qualifying renovation or addition.”
BMT has inspected nearly a million investment properties and its depreciation schedules last the full 40-year lifespan of the property. The one-off fee is 100 per cent tax deductible and comes with a guarantee: if BMT can’t find double its fee in first-year deductions, there’s no charge.
As the ATO cracks down on property-related deductions this tax season, a professionally prepared depreciation schedule has become more important than ever.
“The Australian Tax Office is looking closely at property investors this tax time after finding a large percentage incorrectly claim on their tax return. Depreciation is one of the areas of focus,” Brad says.
“We can stand behind our schedules in the event of an audit. A BMT Tax Depreciation schedule leads to indisputable deductions.
“Bottom line, with such significant potential savings on the table, and a guarantee that means you have nothing to lose, it is always worth asking the question.”
For more information, visit BMT Tax Depreciation.
