Tax depreciation for investment properties

WHAT WE CLAIM

In the 2011-2012 tax year, the most recent period for which Australian Taxation Office statistics are available, more than 623,000 Victorians claimed deductions for rental property expenses. The most common were for municipal taxes, 564,890 claims, water expenses, 539,890, insurance, 476,055, interest on their loans, 474,375, real estate agent fees, 443,430, and repairs and maintenance, 437,625. legal fees, $15,630, pest control, $19,575 and cleaning costs, $62,835. H&R Block regional director Frank Brass said many homeowners knew most of the things they could claim, but there were gaps. .

WHAT WE DO NOT CLAIM

Most real estate investors probably didn’t aim for all they could be, according to Brass. “Part of it is that it’s very hard to know what kind of records you need to keep, and people just give up trying to keep them,” she said. “(And) they’re afraid of doing the wrong thing.” But there is no reason to be. If your records, receipts, and invoices are in good standing, and even if you prepared them yourself, as long as you’ve done your best and you’re not being fraudulent, then the tax office is generally understanding, Mr. Brass. saying. He also noted that you could claim a fifth of your loan costs for the first five years after you buy.

This offsets the stamp duty and legal fees charged on the mortgage. Meanwhile, Bradley Beer, managing director of tax depreciation specialists at BMT, estimated that 70 to 80 percent of investors were not getting the most out of depreciation claims. “The average first year deduction for a first full year of home ownership is around $10,000, and over 10 years it’s around $7,000 per year,” Beer said. He described depreciation claims as a way to get the tax office to accommodate the wear value of your property’s structure. “The building is wearing out, even if the property is gaining value,” Beer said. To get the most out of this, you’ll likely need to see a surveyor, and it’s not just new properties that can make claims. “If you bought a house 10 years ago and five years ago you spent $100,000 on a renovation, there’s stuff in there that’s still going to depreciate, even if you’ve missed the first five years,” Beer said. The more you can claim from the time you rent it, Beer said. The same applies if you buy a renovated property.

WHAT TO OBSERVE

Brass said many people got caught up when they redid funds against the principal of an investment property for personal use, and didn’t adjust the amount they claimed on their interest.

“You can no longer claim the full interest on the loan,” he said. “And what has surprised people for many years is that they don’t think about arousing interest.” There are cases where a couple can buy a property in both their names, but one of them does the tax returns and Mr. Brass noted that people have been caught up in this.

“You must handle the tax side of the property according to the names on the title,” he said. He also said that if he claimed depreciation, those claims would be returned to the government when he sold the property and added to his capital gains tax payment. For vacation home owners, it’s important to remember that you can only claim against them as an investment when you actually rent them out.

If you plan to sell, the capital gains tax exemption only applies to your principal place of residence for as long as you lived there. The 50 percent tax reduction only applies if you have owned the property for more than 12 months.

CLAIMS TO CONSIDER

– Advertising for tenants;

– Shares of owners’ associations;

– Gardening and lawn mowing;

– Interest on loans;

– rigger’s fees;

– Construction materials, including concrete, flooring, and tile, can be claimed as

depreciations;

– Carpets, trash cans, mechanical doors and blinds can also be reclaimed as they age;

– Buyers of apartments and units can also potentially claim against common areas;

– Travel expenses for property inspections;

– Sure;

*Source: BMT, H&R Block and News.com.au