Investors should always look for ways to reduce the costs of owning an investment property, and depreciation deductions should be at the top of their list, especially when yields come under pressure from rising prices.
Around 80% of investors don’t maximise the deductions available from their investment property, so they should add requesting a tax depreciation schedule to their list of 2017 resolutions.
There are four good reasons why commercial property investors should obtain a schedule:
1. Claim an average of $5,000 to $10,000 in the first year
Property depreciation is a non-cash deduction, which can be claimed due to the gradual wear and tear of both the building structure and the plant and equipment items contained within the property. On average, investors can deduct between $5,000 and $10,000 in deductions within the first financial year. By claiming property depreciation, investors are reducing their taxable income and therefore may benefit by receiving more in their annual tax return or avoiding having to pay additional taxes.
2. Every property investor can benefit from a depreciation schedule
Some commercial investors think that because their investment property is old, they won’t benefit from claiming depreciation. This is untrue. Both new and old properties will attract depreciation deductions for their owners. Depreciation deductions can be claimed for all types of investment properties including residential, commercial, industrial, retail, manufacturing and hotel and tourism accommodation.
3. Adjust the previous two years tax returns
If you haven’t been claiming depreciation for your investment property, the previous two years tax returns can be adjusted and claimed back.
4. The fee is 100% deductible
Although there is a cost involved in arranging a depreciation schedule, the fee is 100 deductible. This is why investors should arrange their schedule in the lead up to a financial year rather than wait until tax time.
Investors who own or who are planning to buy a commercial investment property should find out more about depreciation deductions available for their investment property by asking their First National Commercial agent