Understanding Tax On Investment Properties
Tax time is here, and for smart property investors it is a great time to get money spent back into your pocket. One of the major benefits of investing into property rather than other assets classes is the support property investors can receive from the Australian government in the form of tax relief. If you have an investment property or are considering investing into the property market soon make sure you are fully aware of the deductions you are entitled to.
Kathryn Hall Agency’s tips for you to consider before you lodge your tax.
Claiming Depreciation Tax
Depreciation tax is one of the biggest claims that a property investor can make. Essentially you can claim the depreciation on any installments made to the property after purchasing. A quick example of Depreciation tax, Say you buy a new Dishwasher for $1000 with an estimated lifespan of 10 years. You can claim $100 a year against your taxable income for the duration of the the lifespan.
With an investment property, you are only allowed to claim depreciation on certain items against your taxable income. There are two types of depreciation tax deductions that you can claim:
- Depreciation on plant & equipment: this refers to items within the building like ovens, hot water heaters, air conditioners, carpets, blinds, light fittings and so on.
- Depreciation on buildings or ‘building allowance’: this refers to the construction costs of the building itself, such as concrete, brickwork, and so on.
In order to make a tax claim for depreciation, you need a report that identifies all the things that may be claimed against your tax and the current value of each item. This is called a depreciation schedule. Unfortunately, the Australian Tax Office will not allow you to create your own depreciation schedule, you’ll need to employ the services of a qualified Quantity Surveyor to do a thorough inspection to identify what can be claimed and make the necessary valuations on those items. But don’t worry, the cost of preparing your depreciation schedule is also tax deductible.
Get back the money you hate to spend
When you own a property, it sometimes seems like you have to pay out a lot of money for invisible things that don’t have much benefit for you, which can be annoying. Tax time is when you can get your own back, with land tax, council and water rates, property management fees, advertising costs for marketing the property to tenants, body-corporate and strata-title fees all tax deductible expenses.
Remember to claim your finance and insurance cost
Generally speaking, you are allowed to claim all finance costs associated with your property investment, including bank fees and charges, borrowing costs and interest on your loans. All insurance costs for your investment property are also tax deductible.
At Kathryn hall agency we want everyone to know their entitlements when it comes to tax. We have contacts to incredible quantity surveyors to help with inspections to declare the depreciation tax and anything tax related. we also have a Buyers Agency to help you find that perfect investment property.
