As a landlord, you know that managing income-producing properties comes with its fair share of financial considerations. However, did you know that you can benefit from tax depreciation schedules? In fact, after mortgage interest expense, tax depreciation is often the second-largest deduction available to landlords.
So what is a tax depreciation schedule?
A tax depreciation schedule is a comprehensive report that outlines the depreciation deductions you can claim for your property over a 40-year period. It serves as a one-off report used to claim wear and tear on your property and can significantly reduce your taxable income, resulting in substantial tax savings.
Buildings and their contents that are utilised for income-producing purposes are eligible to be depreciated. This means that just like machinery and other capital assets used for generating income, properties can also be depreciated over time. The Australian Taxation Office (ATO) acknowledges this and allows property owners to claim depreciation as a deduction, offering significant taxation benefits.
The Non-Cash Deduction Advantage
Unlike other deductions where you need to spend money upfront to claim a deduction, tax depreciation is considered a non-cash tax deduction. This means that you don’t have to make any additional out-of-pocket expenses to benefit from it. Instead, it takes into account the wear and tear of your property over time, allowing you to claim deductions accordingly.
All Properties Are Eligible
It’s a common misconception that only new properties attract depreciation claims. The truth is that both new and old properties have the potential for depreciation benefits. So, regardless of the age of your property, it’s worth exploring the possibility of claiming tax deductions through depreciation. Don’t miss out on potential savings by assuming your older property won’t qualify.
How do I get my Tax Depreciation schedule?
These schedules are produced by quantity surveyors/accountants. We can refer you to property depreciation specialist that we have worked with in the past (Washington Brown and BMT). At the time of writing both these providers offer a guarantee that they will find double their fee in deductions in the first year, or they will not charge you or go ahead with producing the report. Which is a great win-win.
Maximising Your Deductions
If you haven’t been claiming tax depreciation deductions in the past, don’t worry. You can amend your previous financial years’ tax returns to include them. The ATO allows amendments for the previous two years, and in some cases, you may even receive a refund if you overpaid your taxes.
Here at Rightside, we are always committed to helping our investor clients maximise their profit from their investment property. If you are a landlord, please reach out we would love to help you with your investment property.
