One of the most significant tax deductions that can get overlooked if you own an investment property is ‘special building write-off’ or more commonly known as depreciation on buildings.
Any building where construction started after the 18th July 1985 qualifies for the special building writ-off. That means you can depreciate the original cost of construction. For all buildings, there are a host of depreciable assets like hot water services, blinds, floor coverings and stoves that may be depreciated.
The special building write-off can also be claimed for renovations undertaken after the 18th July 1985. You can ALSO claim architects and engineers fees. Structural inclusions such as retaining walls and sealed driveways, if undertaken after February 1992, also qualify.
These days, most property owners have heard about depreciation. They understand that it can put thousands of dollars in tax deductions back in their pocket each year.
It’s simply compensation for ‘wear and tear’.
We heard earlier this year the ATO would be looking at repair claims and it seems they are. There have been clients asking us to add some expenditure to their Depreciation Schedule after the ATO disallowed their attempt to claim it as a ‘repair’. Broadly speaking, the ATOs definition of a ‘repair’ is to rectify damage that has occurred while YOU are renting out the property. The longer you have been renting out the property, the greater the scope for you to claim repairs.
To claim the special write-off depreciation, you need an ATO compliant depreciation schedule, which are put together by appropriately qualified and authorised quantity surveyors – not accountants!
In most cases, the cost of preparing the report for properties in regional areas is the same as that in capital cities. Occasionally, there is an additional cost for travel but this will be agreed upon up front before the job is started.
The fee is also 100% tax deductible.
If you have an investment property but have overlooked or were not aware of this valuable tax saving tip, make sure you give us a call on (03) 5561 2643 to find out more. The report can even be backdated to retrieve ‘lost’ depreciation.