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Investors missing out on an average $8,212 in depreciation deductions

Market insights 15 March 2019 Read time: 2 minutes

BMT Tax Depreciation’s CEO, Bradley Beer outlines how, despite the tightening of legislation over a year ago, there are still plenty of ways investors can reap depreciation rewards…

Many of Australia’s 2.1 million property investors are still missing out on thousands of dollars in tax deductions each year by failing to maximise or claim depreciation for their rental investments.

While changes to depreciation legislation introduced over a year ago have impacted some investors, there are still thousands of dollars available to be claimed by property investors.

Despite the changes, we are still finding clients an average of $8,212 in legitimate tax deductions during the 2017-2018 financial year for residential properties. Furthermore, owners of properties directly affected by the legislation changes, i.e. second-hand residential properties where contracts were exchanged after 7.30pm on the 9th of May 2017, still had an average claim of $5,651 in the 2017-2018 financial year.

What do the changes to legislation mean for property investors?

This legislation has been grandfathered, which means if you exchanged contracts prior to 7.30pm on the 9th of May 2017 you will not be affected. However, for those who exchanged contracts on a second-hand residential property after 7:30pm on the 9th May 2017, you will no longer be eligible to claim depreciation deductions on previously used plant and equipment.

What can still be depreciated?

There remain several opportunities available to claim tax depreciation for investment properties.

New houses are still eligible for deductions on plant and equipment, as are properties considered to be substantially renovated by the previous owner.

Plant and equipment assets that have been installed and paid for by you will also continue to be tax depreciable. Other examples where you will still be able to claim deductions for plant and equipment include:

  • Deductions that happen in the course of carrying out a business
  • Deductions for a property held by public unit trusts and managed investment trusts
  • Where the property is held by a corporate tax entity.

All property investors can continue to claim depreciation for qualifying capital works. This is considered to be the building’s structure and any permanently fixed assets such as the walls, roof, doors, tiles and toilets. These deductions make up 85-90 per cent of a total depreciation claim.

Still unsure what these changes will look like for you?

It is essential for property investors to always seek expert guidance on what they can claim to ensure they are not missing out on valuable deductions and risk getting it wrong. 

If you would like further information on how these changes may impact you and how simple it is to reap the maximum reward from your investment property, contact the expert team at BMT on 1300 728 726. Alternatively, visit the BMT website to request a quote.

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Article provided by BMT Tax Depreciation. 

Bradley Beer (B. Con. Mgt, AAIQS, MRICS, AVAA) is the Chief Executive Officer of BMT Tax Depreciation.