Frequently Asked Questions
Tax Depreciation FAQ
IS MY PROPERTY TOO OLD TO DEPRECIATE?
Depreciation tax deductions are available to Property Investors whose investment property was built after 15 September 1987 and/or renovated from 27 February 1992. Depreciation on plant and equipment is available on all new buildings and all existing properties purchased prior to 10 May 2017. We GUARANTEE we’ll find 3 x our fee in deductions in the first full financial year alone!
IS DEPRECIATION WORTH IT? WHAT ABOUT CAPITAL GAINS TAX?
Let’s just look at this on face value for a second, claiming tax depreciation INCREASES YOUR CAPITAL GAIN and enables a LARGER AFTER TAX PROFIT. If that is not enough, the increase in tax you pay at the capital gains event is less than half of the savings you have made through claiming tax depreciation over the life of your investment.
RENOVATIONS WERE COMPLETED BY THE PREVIOUS OWNER, SO I CAN’T CLAIM THEM?
There is no truth to this statement. This is where we as Quantity Surveyor’s come in to our own. It does not matter if the works were undertaken by a previous Owner, when you purchased the investment property you have also purchased the entitlement to claim depreciation on the property’s improvements.
BUT WON’T MY ACCOUNTANT LOOK AFTER MY TAX DEPRECIATION?
As QS’ we are experts in construction costs and are recognised by the Australian Taxation Office (ATO) as the most suitably qualified profession to estimate the depreciable expenditure spent on the property prior to your purchase as well as the value of the fittings and equipment within the property. In accordance with ATO Tax Ruling 97/25 , if your investment property was constructed after September 1987 and/or construction costs are unknown, you must engage a registered and qualified QS to produce a depreciation schedule. Your Accountant can’t do this for you.
I HAVE HELD MY PROPERTY FOR YEARS, SO THERE’S NO POINT CLAIMING DEPRECIATION NOW?
I want to start this conversation off very simply with the fact that the structure of your investment property (IP) has an effective life of 40 years! If you have owned your investment property which was built post September 1987 then it is very likely you are missing out on thousands of dollars worth of possible tax deductions. Another tip which could save you thousands is that your Accountant can help you claim tax depreciation retrospectively, amending up to the past two financial year tax returns making the most of your depreciation deductions which you may have lost through not claiming. Completely legitimate and the ATO actually encourage you to do this.
Body Corporate Services FAQ
I KNOW THE BUILDING WAS BUILT FOR X DOLLARS, CAN’T I JUST USE THIS AS THE REPLACEMENT COST / INSURANCE VALUE?
No matter the original construction cost, to be appropriately insured for an insurable event escalation, demolition / removal of debri, re-design and application fees, all have to be taken into account. These are all significant costs over and above the construction cost.
WHAT IS THE ”AVERAGING CLAUSE”?
If you are under insured you will most likely be subject to the ”averaging clause” which means the Insurer will only cover the Body Corporate for the percentage it was actually insured compared to the whole replacement value.
WHAT IS A SINKING FUND?
Sinking funds allow for raising a reasonable amount from levy contributions in a strata titled scheme. This provides for necessary and reasonable spending by the Body Corporate to maintain and replace capital items.