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Property investors may be missing out on thousands of dollars at tax time by undervaluing depreciation benefits, a quantity surveyor has warned.
According to managing director of BMT Tax Depreciation Bradley Beer, many investors do not claim all the depreciation write-offs they are eligible for under the tax code.
In particular, he believes capital works benefits and plant and equipment items are often overlooked.
“We’re continuing to see a trend that suggests the owners of older properties don’t claim the maximum capital works deductions available,” he said.
While eligibility will vary, a property that has been renovated will often attract this type of benefit, even if the previous owner completed the work, Mr Beer said.
Figures from the Australian Taxation Office show one million investors received an average capital works deduction of $2,029 in the 2011/2012 financial year.
Meanwhile, just over 1.7 million investors got a deduction of $1,139 for plant and equipment.
Yet in Mr Beer's experience, the average claim should be higher.
“Data collected from tens of thousands of depreciation schedules prepared by BMT Tax Depreciation suggests the average claim should be around $10,100 in the first full financial year and $7,350 per year on average over the first 10 years of owning a property,” he said.
He argued that many investors lose out by doing the schedule themselves rather than hiring a qualified surveyor.
“A quantity surveyor will perform a site inspection to note any renovations and ensure that all plant and equipment items are listed on a tax depreciation schedule,” he said.
“They use their knowledge of methods of depreciation, such as immediate write-off and low-value pooling, to maximise an investor's claim.”
Depreciation is defined as the decline in the value of an asset.