As the end of the financial year approaches, it's crucial for property investors to consider all available tax deductions to maximise their returns. One of the most significant opportunities, often overlooked by many investors, is claiming depreciation deductions. A comprehensive tax depreciation schedule prepared by experts can make a substantial difference to your cash flow and overall financial strategy. Here's why every residential property investor should have a tax depreciation schedule and how BMT Tax Depreciation Quantity Surveyors can help you achieve this.
What is Property Depreciation?
Depreciation refers to the decline in value of a residential investment property as it ages and the items within it experience wear and tear. This decline in value is a deductible expense that property investors can claim to reduce their taxable income. Unlike other tax deductions, depreciation does not require out-of-pocket expenses at the time of the deduction, making it an efficient way to enhance your tax benefits.
Why is Depreciation Important for Landlords?
Depreciation is the second-largest tax deduction available to property investors after interest. Both new and old residential investment properties have substantial depreciable value. According to BMT, residential investors can find an average of almost $9,000 in deductions in the first full financial year and more than $40,000 over the first five years. These deductions can significantly improve your cash flow and overall financial returns.
Key Benefits of Claiming Depreciation
- Reduces taxable income – Lower your annual tax bill by claiming depreciation deductions.
- Improves cash flow – More money in your pocket without additional out-of-pocket expenses.
- Available for new and older properties – Even older properties have depreciable assets that can be claimed.
What Can You Claim?
1. Capital Works (Building Depreciation)
Capital works deductions (Division 43) apply to the structural elements of a building, including:
- Walls, roofs, and flooring
- Electrical systems
- Plumbing and water systems
Properties built after 16 September 1987 are eligible for capital works deductions, which can be claimed over 40 years.
2. Plant and Equipment Depreciation
Plant and equipment assets (Division 40) refer to removable items within the property, such as:
- Carpets, blinds, and curtains
- Air conditioners and hot water systems
- Kitchen appliances (ovens, dishwashers, etc.)
Unlike capital works deductions, plant and equipment depreciation varies based on the item's effective lifespan.
How Can Landlords Maximise Their Depreciation Claims?
Engaging a Quantity Surveyor
A quantity surveyor, such as BMT Tax Depreciation, plays a crucial role in ensuring you claim the maximum depreciation deductions available. Their expertise allows them to identify and quantify all depreciable items within your property, including those you might not be aware of. This ensures you do not miss out on any potential deductions.
What's Included in a BMT Tax Depreciation Schedule?
A BMT Tax Depreciation Schedule includes:
- A 40-year depreciation forecast outlining all claimable deductions.
- Different depreciation methods (diminishing value and prime cost) to show potential deductions under both methods.
- Common property depreciation for apartments and townhouses (e.g., lifts, pools, gyms).
- Pro-rata calculations to ensure claims start from your settlement date.
- Split schedules for multiple owners to maximise individual deductions.
Tax Deductions Beyond Depreciation
Alongside depreciation, landlords can claim several other deductions to further reduce their taxable income, including:
Tax-Deductible Expenses for Property Investors
- Accounting fees – Costs associated with tax return preparation.
- Advertising costs – Fees for marketing your rental property.
- Agent and property management fees – Commissions and service charges from your property manager.
- Council rates and water charges – Ongoing municipal fees.
- Interest on loans – Deductible if used for investment property purposes.
- Repairs and maintenance – Fixing issues to keep the property in good condition.
- Landlord's insurance – Covering loss of rent, damage, or legal costs.
Expenses You Cannot Claim
- Stamp duty on property purchase – This is a capital expense, not an annual deduction.
- Tenant-paid expenses – Any costs already covered by the tenant cannot be claimed.
- Renovation costs – These must be capitalised and deducted over time rather than immediately.
Tax Time: Preparing for Your Tax Return
As the financial year-end draws near, it's important to organise your documents and ensure you're maximising your tax deductions. Your accountant will require the following paperwork:
✔ Bank statements – For property-related transactions.
✔ Invoices and receipts – For deductible expenses.
✔ Insurance documents – Outlining landlord insurance coverage.
✔ Income and expenses statement – From your property manager.
✔ Rates notices – For council and water charges.
✔ Tax depreciation schedule – A report from a quantity surveyor detailing eligible deductions.
TIP: To simplify tax time, maintain a digital folder where you store property-related documents throughout the year.
Maximise Your Tax Return with a BMT Tax Depreciation Schedule
As the financial year-end approaches, it's essential to ensure you are claiming all available deductions. Depreciation is a powerful tool that can significantly reduce your taxable income and increase your tax return. However, many investors fail to fully utilise this opportunity.
By working with BMT Tax Depreciation Quantity Surveyors, you can ensure you are claiming the maximum deductions available, potentially saving thousands of dollars each year.
Special Promotion Offer for Landlords
To help our landlords take advantage of these benefits, we are offering an exclusive promotion in partnership with BMT Tax Depreciation Quantity Surveyors. Click the contact form below to request a promo code that offers a reduced fee on your residential depreciation schedule.
Don't miss out on this opportunity to maximise your tax return and improve your cash flow!
Get Expert Advice on Property Investment & Depreciation
If you're searching for a trusted and experienced property management team to help maximise your investment, Century 21 Novocastrian can assist.
For personalised, tailored advice from our investor consultants, book an investment consultation via Calendly.
EMAIL hello@c21newcastle.com.au
PHONE | 02 4943 6333
ADDRESS | 155 Pacific Highway, Charlestown NSW 2290