Reducing your expenses as a property investor is ultimately the wisest thing you can do. The less you’re spending, the more money you’re making.
Calculating depreciation deductions accurately and regularly is part of reducing costs as well and should be made a top priority every single year.
There is a greater need for this in areas where the rapid growth in property value has started to put tremendous pressure on yields. However, reports indicate that approximately 80 per cent of Australian property investors aren’t taking full advantage and maximising their deductions each financial year.
It’s crazy to think that so many people aren’t utilising a tax depreciation schedule to increase their own profits when they’re rightly entitled to. It could just be the solution you’re looking for in minimising your losses.
Let’s take a more detailed look at four reasons why including depreciation deductions is nothing short of a great idea.
1. $5,000 – $10,000 is the average amount investors claim within their first year.
Firstly, lets explain what claiming depreciation means. It is a tax deduction you can claim as an investor in relation to the general wear and tear of a property. This means that the building structure and equipment within the property are included.
On average, between $5,000 and $10,000 can be claimed within the first year, providing a significant financial benefit. This reduces your taxable income and allows you to ‘put more back in your own pocket’ so to speak.
2. All investors can benefit from depreciation schedules.
Oftentimes property investors who own an older property believe that they won’t necessarily benefit from a tax depreciation schedule. This is most certainly not the case. You can claim depreciation deductions regardless of the age of your property.
It is important to note that property type does not make a difference either. Whether you own a residential, commercial, industrial, retail or any other type property, it’s still possible to claim depreciation deductions.
3. You’re able to amend your previous tax returns.
More good news! If you haven’t claimed depreciation deductions from the last two years’ tax returns, they can be claimed back in the next one.
4. The fee is deductible.
While initially the fee for submitting a tax depreciation schedule will cost you, it is also 100% deductible just like any other expense. It’s always a better idea to organize and prepare for your depreciation schedule well in advance of tax time. Leaving it until the last minute can cause financial complication, and let’s be honest, who needs that?
It is highly recommended that all property investors discuss a tax depreciation schedule with their local agent earlier in the year rather than waiting until June.
The bottom line is, if you’re not claiming these deductions, you’re missing out – big time!