How to maximise depreciation for investment property

What 80% of investors don't know about property depreciation: How to maximise deductions or your money back.

depreciation Your accountant is great with numbers when it comes to tax, you’ve got a buyer’s agent picking the next hotspot for you, even your own mortgage broker to help you find the best loan - but who’s got your back when it comes to maximising your deductions?

The advantages of having a depreciation report completed are often overlooked, even by the most experienced investors. So, why do you need one and how could it benefit you?

Depreciation comes in two elements; the actual structure of the building, and what’s inside of it. What’s inside depreciates the quickest, so you’ll need to take advantage of it as soon as you can. This is where tax depreciation comes in, to help you with your cash flow needs at times when it’s needed most.

Bradley Beer, Managing Director of BMT Tax Depreciation Quantity Surveyors has over 15 years experience in his field. From the building and construction industry to property depreciation, he shares some inside tips and knowledge and explains the importance of tax depreciation below.

Bradley Beer Tax Depreciation

Bradley Beer

  • Bradley is the Chief Executive Officer of BMT Tax Depreciation.
  • Bradley is a regular speaker and presenter covering property depreciation services on television, radio, at conferences and exhibitions Australia-wide.
  • He has more than 15 years of experience in the depreciation, building and construction industry.

What is property tax depreciation and what benefit does it have for the investor or homeowner?

As a building gets older, items wear out, they depreciate. The Australian Taxation Office (ATO) allows property owners to claim this depreciation as a deduction. Depreciation can be claimed by any property owner who obtains income from their property.

Depreciation is not available to be claimed on a primary place of residence simply because it is not income producing. Research shows that 80% of property investors are failing to take advantage of property depreciation and are missing out on thousands of dollars in their pockets.

What is a quantity surveyor and why do I need to use one?

Traditionally a quantity surveyor’s role is to measure buildings and estimate construction costs based on plans and specifications in order to determine how much it would cost to build the property in the current market at the specified location.

Quantity surveyors are one of the few professionals recognised by the ATO to have the appropriate construction costing skills to calculate the cost of items for the purposes of depreciation.

A quantity surveyor’s skills and knowledge of the legislation allows them to find the maximum depreciation deductions available for an investor.

With every enquiry that we get, we always ask a couple of questions about your property to ensure that getting a depreciation schedule completed is going to be worthwhile. If we don’t find at least twice our fee in deductions within the first full year we will not charge for our services.

What are your favourite tips for property tax depreciation?

One of the most common questions that we hear is ‘doesn’t my accountant take care of this’? We work alongside your accountant by providing them with a detailed depreciation schedule outlining all of the deductions available on your investment property. Your accountant then uses this depreciation schedule when preparing your tax return.

Many people believe that older properties will have no depreciation left. While an older property will not have as much depreciation available as a new property, there are often still valuable deductions available to be claimed. Many times there will have been updates and renovations completed on the property by a previous owner which can be claimed as a deduction by the current owner. It is always worth contacting a quantity surveyor for a free assessment to determine if depreciation is available on your property.

We’ve found that about 80% of investors are not maximising their depreciation deductions. If you haven’t been claiming or maximising your depreciation deductions, the ATO allows you to go back and amend two previous tax returns to reclaim the dollars you have been missing out on.

When planning a renovation, don’t forget to take into account the depreciation deductions which may be available to claim on the existing assets being replaced within the property. When items are removed from a property or ‘scrapped’, the ATO will allow you to claim the remaining depreciable value left as a deduction. It is important to have a quantity surveyor complete an inspection of the property prior to the renovations starting in order to document all items prior to their removal. Once the renovations have been completed, the quantity surveyor is then able to complete a second inspection to determine the depreciation deductions that are available for all new items within the property as well as determining which assets were removed and had depreciable value left to be claimed.

One of the most important tips I can offer is to get in a qualified quantity surveyor for your depreciation schedule. Although there are many low cost DIY options on the market, these often end up costing you more in missed deductions than you would have saved in the original cost of the schedule. It’s also important to remember that the fee for the completion of a depreciation schedule is 100% tax deductible so it won’t end up costing you a cent in the long run anyway.

How much does a depreciation schedule cost?

For standard residential properties or units, the fee to have a tax depreciation schedule completed is generally $770 including GST. This includes the property inspection completed by one of our qualified staff and the 40 year depreciation schedule which will last the life of the property.

With every enquiry that we get, we always ask a couple of questions about your property to ensure that getting a depreciation schedule completed is going to be worthwhile. If we don’t find at least twice our fee in deductions within the first full year we will not charge for our services.

It is always worthwhile enquiring about the depreciation deductions which may be available on your investment property. This could lead to thousands of dollars back in your pocket.

Check out investment loans from across the market

Rates last updated November 14th, 2018
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Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.89%
4.24%
$0
$0 p.a.
80%
Fix your rate and minimise repayments for 2 years with this interest-only investor mortgage.
3.99%
3.99%
$0
$0 p.a.
80%
Get a discounted, low-fee investor loan from a convenient online lender. 20% deposit required.
3.99%
4.13%
$0
$10 monthly ($120 p.a.)
80%
A competitive variable rate home loan with no application fee.
3.84%
3.91%
$0
$0 p.a.
80%
Get instant online approval and flexible repayment options with this fixed rate mortgage for investing.
3.79%
3.82%
$0
$0 p.a.
80%
An essentials variable investor mortgage with a high borrowing amount so you can fund a large purchase.
4.08%
4.13%
$600
$0 p.a.
90%
Fund your investment purchase and offset up to $15,000. Available with a 10% deposit.
3.99%
3.99%
$0
$0 p.a.
70%
Investors with a 30% deposit can get this low rate loan to fund their property portfolio. Take advantage of split and redraw facilities.
3.74%
3.79%
$499
$0 p.a.
80%
Competitive variable investor mortgage to fund your property portfolio. You can add a 100% offset account for just $10 a month.
3.93%
3.94%
$0
$0 p.a.
80%
This investment loan keeps fees low, has a sharp interest rate and comes with a 100% offset account.
3.99%
5.35%
$600
$0 p.a.
90%
Competitive rates for fixed for 3 years with redraw facility.
4.03%
3.92%
$499
$0 p.a.
80%
A competitive 3 year investor rate with principal and interest repayments. Optional offset account with a $10 monthly fee.
4.05%
4.22%
$0
$10 monthly ($120 p.a.)
90%
Lock in your interest rate on your investment property for 2 years. For a limited time you can earn double Velocity Frequent Flyer Points.
3.91%
3.92%
$0
$0 p.a.
80%
Investors can go from application to approval in as little as 20 minutes with this innovative online lender.
4.43%
4.28%
$600
$0 p.a.
90%
An interest only investor mortgage that lets you offset up to $15,000. Available with a 10% deposit.
3.98%
3.98%
$0
$0 p.a.
70%
Investors can get a 100% offset account and a low rate if they have a big deposit. 100% online application process.
4.09%
4.87%
$0
$395 p.a.
90%
Buy your investment property and set your repayments for the first year. Available in QLD, NSW and ACT only.
4.24%
4.00%
$0
$0 p.a.
80%
Buy an investment property and enjoy the certainty of a 3-year fixed rate with interest-only payments.
4.09%
4.40%
$0
$0 p.a.
70%
Forget about rate rises for two years and minimise your investment repayments with this interest only mortgage. Requires a 30% deposit.
4.54%
4.59%
$600
$0 p.a.
80%
An investment loan for new Heritage Bank customers. Low fees and interest-only repayments.
3.97%
3.99%
$0
$0 p.a.
80%
Package your owner occupied loan with investment loan and receive a discounted investment rate. 100% offset account included.
4.29%
5.33%
$0
$395 p.a.
90%
Lock in a competitive investment rate and combine your loan with a credit card and transaction account for extra savings. Package fee applies.
3.99%
4.62%
$395
$0 p.a.
80%
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
4.29%
4.31%
$0
$0 p.a.
80%
Investors will pay no application or ongoing fees for this interest-only loan.
4.18%
4.18%
$0
$0 p.a.
80%
Investors get a 100% offset account and pay no application or ongoing fees on this loan from an innovative online lender.
4.14%
3.96%
$0
$0 p.a.
80%
Investors can go from application to full approval in as little as 20 minutes with this innovative online lender.
4.13%
4.14%
$0
$0 p.a.
90%
Access a fee-free offset account and a special interest rate for investors.
4.29%
4.31%
$0
$0 p.a.
80%
A simple, variable rate investor loan from an online lender that keeps fees to a minimum.
3.99%
4.62%
$395
$0 p.a.
80%
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
4.90%
4.31%
$0
$0 p.a.
80%
Lock in a fixed rate for 5 years and make interest-only payments with this investment loan.
4.24%
4.68%
$0
$0 p.a.
90%
Fix your investment repayments for 1 year. You can get this loan with a 10% deposit. Available in QLD, NSW and ACT only.
4.18%
4.19%
$0
$0 p.a.
80%
Investors can easily access their equity using BPAY, a debit Master Card or cheque book with this interest-only line of credit.
4.31%
3.95%
$0
$0 p.a.
80%
A variable interest-only loan for investors. Fast application, low fees, optional offset account. 100% online lender.
4.64%
5.39%
$0
$395 p.a.
90%
Pay off your investment knowing your exact repayments for the first 4 years. Get this loan with a 10% deposit.
4.29%
4.27%
$0
$198 p.a.
70%
Fund your property portfolio with this fixed rate mortgage which includes a 100% offset account. 30% deposit required.
3.94%
3.92%
$0
$0 p.a.
80%
Lock in your interest rate for 2 years and enjoy flexibility, an optional offset account and a fast online application process.

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Shirley Liu is a program manager at finder, formerly the publisher for Banking and Investments. She is passionate about helping people make an informed decision, save money and find the best deal for their needs.

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