Property investors missing out on big deductions: expert

By Bianca Dabu 03 November 2020 | 1 minute read

Investment property owners could be leaving thousands of dollars in the ATO’s coffers because they fail to take full advantage of the deductions they are entitled to, according to an expert.

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Following the 31 October deadline for lodging tax returns, Custodian CEO and 7 Steps to Wealth author John Fitzgerald urged property investors to learn how to make the most of the tax deductions available to them.

“I’m continually surprised by the number of investment property owners who don’t even claim depreciation on their asset. These deductions can be quite significant, I’m talking in the thousands of dollars, particularly when you buy a brand-new investment property.”

According to Mr Fitzgerald, for investors who find the process a little too complicated due to time or resources restraints, they could engage a quantity surveyor for just a few hundred dollars to prepare a depreciation schedule, which could reap huge financial rewards.

“It’s a one-off cost,” Mr Fitzgerald said.

“A depreciation schedule generally lasts the lifetime of the asset and allows the owner to claim every year on the wear and tear of their property which significantly reduces their taxable income.”

These dedications ultimately prove the potential of property as a wealth-creation vehicle, Mr Fitzgerald highlighted.

“That’s why property investment is such a great way to create wealth. You can borrow money to buy an investment property and the interest costs can be tax deductible. Your property management costs and maintenance and repair costs are tax deductible and you can claim depreciation on the building.

“If you buy a property for $500,000, which after land is worth about $250,000, you could potentially achieve a tax deduction of about $10,000 a year,” he concluded.

Among the deductions that investors can claim depreciation on are capital works and fixture and fittings for new property, and fixture and fittings for existing property.

The expenses that they can claim include advertising for tenants, bank fees and charges including interest on loans, body corporate fees and charges; council rates and land tax; and insurance, property agent’s fees and commissions, quantity surveyor’s fees and repairs and maintenance.

On the other hand, the expenses that they can’t claim are travel expenses to inspect a property before they buy it, expenses for rental seminars about helping them find a rental property to invest in, and travel expenses to inspect the property, unless they are using the property in carrying on a business.

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Property

Property refers to either a tangible or intangible item that an individual or business has legal rights or ownership of, such as houses, cars, stocks or bond certificates.

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Property investors missing out on big deductions: expert
Property investors missing out on big deductions: expert
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