Tax depreciation for investment properties
WHAT WE CLAIM
In tax year 2011-2012, the most recent period for which statistics are available from the Australian Taxation Office, more than 623,000 Victorians made deduction claims 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 fees, $62,835. H&R Block regional director Frank Brass said many homeowners knew about most things they could claim, but there were gaps. .
WHAT WE DO NOT CLAIM
Most real estate investors probably didn’t claim 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 order and even if you prepared them yourself, as long as you have done the best you can and are not being fraudulent, then the tax office is generally understanding, Mr Brass. said. He also pointed out that you could claim a fifth of your loan expenses during 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 of deductions for a first full year of owning a property is around $10,000, and for 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 and tear value of your property structure. “The building is wearing down, 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 are things in there that will still depreciate, even if you missed the first five years,” Beer said. The more you can claim from the moment you rent it, Beer said. The same applies if you buy a renovated property.
WHAT TO LOOK FOR
Brass said many people got caught up when they re-withdrew 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 piquing interest.” There are cases where a couple can buy property in both their names, but one of them does the tax returns and Mr. Brass noted that people have gotten caught up in this.
“You have to 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 primary place of residence for as long as you have 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;
– Quotas of owner companies;
– Gardening and lawn mowing;
– Interest on loans;
– surveyor’s fees;
– Building materials, including concrete, flooring, and tile, can be claimed as
depreciations;
– Carpets, trash cans, mechanical doors and shutters can also be reclaimed as they age;
– Apartment and unit buyers can also potentially claim against common areas;
– Travel expenses for property inspections;
– Sure;
*Source: BMT, H&R Block and News.com.au