With the ATO’s October 31 deadline for tax return lodgement fast approaching, investors are being advised to get their act together and take advantage of the available entitlements.
Tyron Hyde, CEO of quantity surveying firm Washington Brown, said investors should take advantage of depreciation write-offs when lodging their returns this tax season.
“There are some key items that you can depreciate at 100 per cent so investors can maximise their returns on investment properties straightaway,” he said.
“Depreciation is really about claiming the wear and tear on your property, from carpets and blinds to ovens and dishwashers. It’s a way to reduce your taxable income and it’s perfectly legal.”
Mr Hyde reminded investors that depreciation is the only non-cash deduction available to property investors, meaning “it’s the only deduction you don’t have to fork out the cash for upfront”.
Mr Hyde offered the following four tips to investors to maximise their depreciation claims:
1. Individual items under $300 can be claimed immediately
“If you’re buying a microwave, buy the one that’s $299 instead of $319. This is better than depreciating it at the prime cost rate of 10 per cent per annum (or $30 in the first year). That’s a 1,000 per cent increase,” he said.
2. Big-ticket items can be claimed too
“If your portion of an expensive item is under $300, you can claim it.
“For example, a garage door costs $2,500 in a building of 10 units therefore your cost is $250. This amount can be depreciated immediately.”
3. Items valued between $300 and $1,000 can be depreciated at a higher rate
“Through the low-value pool method, you can claim these at a rate of 37.5 per cent. So if you bought an oven for $950 you can claim $356. Smart.”
4. Split your report to get more
“If you have bought a property as a group, say with family or friends, ask your quantity surveyor to split the depreciation report between the investors to get more bang for your buck.”
Accounting firm H&R Block also reminded investors this week of the looming October 31 deadline and said “those who fail to lodge their returns by that date face potentially heavy fines and penalties”.
The company compiled a checklist of the most common items taxpayers need to substantiate income, deductions and rebates/tax offsets and what records are required to back-up their claims.
- Statements of all income received during the year: payment summaries, Centrelink statements, compensation and income from jury duty, hobbies, and casual labour
- Sale of shares or other assets, including property
- Money received from rents, royalties, pensions and tips
- Employee shares income
- Interest earned on savings accounts and other investments
- Dividends received from shares and other investments
- Business income
- Overseas income – as an Australian tax resident you are required to declare your worldwide income
- Investment property income
- Any other income you have earned
- Union or professional dues
- Self-education expenses incurred to improve your job skills
- Uniforms, protective clothing and sunscreen
- Tools and equipment you purchased and used for work
- Motor vehicle use for work – you should keep a motor vehicle log book for 90 days to maximise your claim for motor vehicle expenses
- Use of your mobile phone for work – keep the phone accounts and keep a log for 30 days to determine the business use
- Use of internet for work – keep the internet and phone accounts and keep a log for 30 days to determine the business use
- Use of a home office for work – keep a log of the number of hours and you can claim the set rate per hour that the Australian Tax Office allows
- Tax preparation fees
- Investment expenses
- Donations to registered charities
The ATO website says you can “usually” lodge later than the October 31 deadline, provided you register as a client of a tax agent before the deadline.