Perth Property Hub


Perth Property Hub

The simplest and most effective way to offset increasing interest costs is to start claiming Depreciation.

It’s the second biggest tax deduction according to the ATO, with the average depreciation claim being over $8000 per year. If owners don’t currently have a schedule in place, this is a key part of their investment they will be missing out on.

And in the short term, if Depreciation has not been claimed previously, owners can claim up to two prior years of depreciation on an investment property for an instant refund back from the ATO.

How much could these missed deductions add up to?
Asset Reports recently delivered a Depreciation Schedule on a property purchased new in 2011, which was then owner-occupied from 2011 to 2017, before being rented as an investment property from October 2017 onwards.

Asset Reports advised that the owner could claim deductions for two prior financial years as they hadn’t claimed Depreciation in those years. The owner had submitted their tax returns in those years, but the ATO allows two years to submit an amendment to a tax return. This time starts from the day after your notice of assessment is sent to you, and you can submit more than one amendment request during the period of review.

Prior to the Schedule being ready, the owner contacted their Accountant to check and advised that they want to amend those two prior Tax Returns ASAP. As soon as the Depreciation Schedule was ready, the owner forwarded it to their Accountant who amended those Tax Returns and within 7 days they had received a refund for overpaid tax in their bank account

The total refund from claiming these missed deductions came to $8,989.52

2019/20: Depreciation Claimable: $14,352 x Tax Rate 33.4% = $4,793.57

2020/21: Depreciation Claimable: $12,871 x Tax Rate 32.6% = $4,195.95

On top of this the owner will claim $12,014.63 in Depreciation in 2021/22 plus the one-off cost of the Schedule of $550, and continue to claim Depreciation every year for the life of their investment – up to 40 years.

What you can claim:

  • Interest
  • Depreciation (including certain capital works)
  • Body corporate and strata levies
  • Management and letting fees
  • Council Rates
  • Insurance (including building contents and public liability)
  • Water and utility costs
  • Maintenance & repairs
  • Land tax
  • Cleaning costs
  • Gardening and lawn mowing services
  • Pest control
  • Security fees
  • Bookkeeping and tax-related expenses

What you can’t claim:

  • Expenses of a capital nature or of a private nature
  • Expenses related to the acquisition and disposal of the relevant property
  • Expenses that are body corporate payments to a special purpose fund to pay a particular capital expenditure
  • Expenses which are not actually incurred by the taxpayer (e.g. water and electricity charges paid by the tenants)
  • Expenses that aren’t related to the rental of a property (e.g. expenses connected to a holiday home that is rented out for part of the year).

There can be significant deductions even on smaller properties, and owners of apartments are able to claim Depreciation on a portion of strata common areas.

Brand New Apartment $295

Standard Residential $550

A Tax Depreciation Schedule prepared by a qualified quantity surveyor is the only way you can substantiate your claim with the ATO.

For a free estimate on the potential deductions available for your investment property, contact Asset Reports today.

6444 6341

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