Tax depreciation: don't overlook the small stuff

It is estimated that each year hundreds of millions of dollars in legitimate tax benefits go unclaimed by property investors throughout Australia.

This occurs because many property investors do not use the service of a qualified tax depreciation specialist to identify items that can be claimed for tax depreciation purposes.

These ‘hidden’ tax benefits can amount to thousands of dollars in additional tax benefits for individual investors each year if they are correctly identified.

With the 2016-17 financial year fast approaching, it is important that property investors engage the services of an ATO-compliant tax depreciation company to undertake a tax depreciation report for their properties so they can fully claim their tax depreciation benefits.

The reality is that many Australian property investors are unaware that a tax depreciation report undertaken by a professional tax depreciation company can identify hundreds of items in an investment property for which they can claim legitimate depreciation benefits.

With rental yields declining in most capital cities throughout Australia, owners of investment properties can significantly boost their cash flow by claiming these tax deductions on a large number of various household items.

For example, it may surprise many property investors that even garden gnomes can be depreciated for tax purposes.

Under taxation ruling TR2006/15 garden gnomes can be depreciated for tax purposes as plant over their economic life.

Many investors in Australia totally underestimate the number of items that can be depreciated for tax purposes. This comprehensive list can even include garden gnomes, cubby houses and, for investors who own apartments, common areas such as car parking and recreational facilities.

The tax benefits associated with negative gearing can be very significant, with DEPPRO clients achieving tax benefits obtained through depreciation equivalent to 60 per cent of the total purchase price of the property. In some cases these tax benefits can total $300,000 based on a purchase price of $500,000.

To qualify for these legitimate tax deductions, an investor must have a fully compliant tax depreciation company undertake an onsite inspection of the property and then compile a depreciation report based on this inspection.

Estimates of tax depreciation benefits for an investment property made from an office desk will not be accepted by the ATO.

Depreciation is a complex area of taxation that requires a professional company to undertake a depreciation report because of constant changes in rules.

The ATO is now taking a more aggressive approach to tax deductions made by residential investors and has asked a large number to provide more details about their claims relating to property investment.

Property investors should check that the company undertaking their tax depreciation schedule is a member of the Australian Institute of Quantity Surveyors (AIQS).

Employing a company who is a member of the AIQS ensures consumers that their tax depreciation report will be compliant and completed in a professional manner.