Depreciation and what it means for you
tax-and-legal-advice

Depreciation and what it means for you

Depreciation and what it means for you

by Todd Stevens | March 29, 2018

An obvious reason for people to become involved in property investment is to take advantage of market appreciation as a way of increasing their wealth, so the concept of depreciation may not even be something that they might consider.

Bradley Beer, BMT Tax Depreciation

In this episode, Smart Property Investment’s Phil Tarrant is joined by Bradley Beer, CEO of BMT Tax Depreciation to discuss what depreciation is and the impact that calculating it properly will have on your tax situation.

Bradley will also discuss the tax complications which recent changes to depreciation law will have for investors as well as some variations which may impact those buying interstate, but will also look at what has stayed the same and how to best utilize that to your advantage.

The pair will also cover scrapping, the biggest misconceptions around depreciation, and whether there are more legal changes set to come.

 

If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: Facebook, Twitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!

 

RELATED AREAS OF INTEREST:

New v existing — which one should I choose?
Double standard property legislation passes both houses
How will a change in government affect property investors?

 

Announcer:    Welcome to the Smart Property Investment Show with your host Phil Tarrant.

Phil Tarrant: Hello everyone, Phil Tarrant here. Welcome to the Smart Property Investment Show. Thanks for joining us today. We're going to get a bit technical, so for those of you who write in and often we get some pretty complicated questions coming in; I think today's conversation is going to be quite interesting. For those of you who like to brush over the details, hold on because we're going to talk about tax, we're going to talk about depreciation, we're going to talk about maximising your investments by making sure that you've got all this sort of stuff in order. To help me out today, I have Brad Beer. He's the CEO of BMT Tax Depreciation. Brad, how are you going?

Brad Beer:     Great Phil, and great to be here.

Phil Tarrant: Good to have you here. I know you're a good friend of the show, and we've known each other for a number of years now. We see each other at property shows all over the joint and often get together just to talk property investment. Sometimes, over a good bottle of red, which I do like. So it gets the,

Brad Beer:     Likewise.

Phil Tarrant: It gets the head thinking and some of our conversations are often quite interesting. What do you know about tax depreciation? What do you know about depreciation, shall we?

Brad Beer:     In nearly 20 years in my job and doing lots of depreciation shows for investors, about 600,000 of them actually in total.

Phil Tarrant: Okay, nearly 600,000

Brad Beer:     Yeah, not, I didn't personally do them all, but we have done about that. I did a fair share of them over my time in nearly 20 years of BMT. So, you know, I've learned a thing or two about depreciation over that time. 

Phil Tarrant: Okay, well that's important. So, I think most of our listeners will know of the word depreciation, though, they would have come across it somewhere, and I know I'm probably, I've done this myself over the past. It's always been a secondary, if not a third, or fourth, or fifth consideration when it comes to managing my portfolio, but it's very important. So, depreciation Brad. What is it?

Brad Beer:     Look, interesting you say third or fourth, and interesting people who've heard of depreciation and sometimes I think the simple way to explain it is so people understand it because they own cars in their life, and they buy cars and they do down in value as soon as you drive them out the door. Depreciation when it relates to property is a similar concept. You buy a property, if you use it for investment this sort of wear and tear or decline in values against your stove, or you hot water service, or your bricks and mortar for that matter. The tax office allows us to make a tax deduction for those losses. You know, people understand it with a car. It's a little harder to understand on your property because you think, hang on, I'm buying property for to appreciate in value because I want to grow wealth, what's this depreciation on property? But, it's actually related to the building itself and the items in it. That actually are wearing out because even though your property is worth more your carpets still wearing out over that time.

Phil Tarrant: Okay, so as a tool or the utility of depreciation for investors is that at a point in time when they do their tax return or they can actually say here's my asset this is the stuff going down in value and therefor there should be some tax consequence associated with that, is that pretty much what it is? Or it's a bit more than that isn't it?

Brad Beer:     Yeah, it's a little more than that, but when you said you think of it, you know, third, fourth, or fifth, or whenever it is; I think all the fundamentals in investing in property and why you do that are about wealth creation, and there's things and drivers for value that are important for that, and then there's a cashflow output to that. Depreciation is one of those cash flow elements that really, in crunching all your numbers, before you buy that property you should have an understanding of what those numbers look like, and think about depreciation there. But, you don't buy something for tax deductions, you buy it for the purpose of creating wealth in the ways that create wealth.

            Why it's thought about afterwards is because when you need it is really when you do a tax return. When you do a tax return there's a certain number attached to this depreciation. Now before you buy, you want some sort of estimate of how much that number should be so you know what you cash flow is going to look like, but you make these deductions generally when you do a tax return. Hence, you want to know what these numbers are, and that's kinda where we come into that scenario. We calculate those numbers.

Phil Tarrant: So, you spoke about a depreciation schedule. So, is this just a list of all the items and what they're, the speed of which they go down in value, is that a good way to frame that?

Brad Beer:     That's probably the, very simple. It's a list of the items and the important part is really a value or cost on those items, which is what the quantity surveyor does. And then, the tax office actually gives us a how long they should last, or an effective life on these items, and the schedule is, yeah, pretty much that. A list of items, a value against those items, how much life there expected to have. Which the tax office gives us, and then projects out the numbers and tells you what to claim each year. 

Phil Tarrant: Are you allowed to do that yourself, or do you actually got to get someone that knows what they're doing to do that for you?

Brad Beer:     So, the, as I say, the quantity surveyor, traditionally

Phil Tarrant: So, what's a quantity surveyor? Cause I think people get confused what a quantity surveyor does different things in residential, commercial and all that sort of stuff. So, what is a quantity surveyor?

Brad Beer:     So, simply where, like, I've done a billing degree I'm not an accountant. I'm a construction type guy. So, a quantity surveyor traditionally measures and estimate construction costs of buildings. So, if a developer want's to build a high rise, with the plans we can count the bricks, and everything in that building, and tell you how much it should cost to build it. So, traditionally, what a quantity surveyor does is actually measure and cost buildings. We don't build them, but we measure, which is where the quantity comes in. How much of everything and then how much it costs to build it.

            The reason you don't do this yourself is the tax office says they want someone who knows about construction costs involved in this process, unless you've got all of these costs. Then, so, from a compliance point of view when the tax office ordered to you and says where'd you come up with your costs? Well, the quantity surveyor told me. So, the quantity surveyor knows about construction costs. On top of just knowing about that construction cost need to know how to marry that properly with the tax rules. So, if I give you all the costs and you know all the tax rules; you should be able to apply all the tax rules to claim the deductions. So, we give you the cost, we marry them with the tax rules to work out and try to get the most deductions out of those properties that we can.

Phil Tarrant: Okay, and If you see your accountant at tax time, you should be seeing more often if you're a practical investor, but if you see your accountant at tax time and says "you need a new depreciation schedule I can do it for you." Can your accountant do it, or will they typically go to someone like you and get you to prepare it?

Brad Beer:     So, most of the depreciation schedules we do are because the accountant says "you know, call Brad and his mates and they'll sort you out with the right numbers." A proactive accountant doing the right thing by your property would understand that they're not a quantity surveyor that estimates construction costs. So if they come up with some numbers and they get challenged they'll have nothing to rest on. If I give them the numbers and they apply the rules, they should understand the rules. But, then we actually just project the numbers as well. I could give them a list of the costs and then they're gonna project them. So, we just project them based on a standard set of tax rules after we put, identify the right items, put the value on those items, and identify the construction costs, so the numbers can be projected from there.

Phil Tarrant: And, do you have to do this every year? Or you just a depreciation schedule one time?

Brad Beer:     So, we, the premise of depreciation is there's a cost on an item when you acquire it. Whether it's a construction cost, or a value, or whatever we want to call that, and that is set at the time that you acquire that item. Once that's done it has a depreciation rate applied to it. So, if I told you what it was for the first year you or your accountant can actually work it out for the second year. You don't need to come and see me again to do that. So, we project it for the life. The only thing that changes is at a later date, in five years time, you stove breaks down, or whatever it is, then obviously you'll need to get rid of that stove; which will have a scrapping value associated with it, and you put a new stove in and start depreciating the new stove.

            When we do it for you, you use the numbers for 40 years if it's a new property unless you change something in it because obviously that counts either future changes of stoves.

Phil Tarrant: Absolutely, you've got to keep your stoves working for your tenants. So, we've spoke about this a lot in the show last year actually, and we're coming up to the budget again. I think I was in Canberra last May. I think you were down there at the same time, we were probably at the same functions. I think you even went to a lock up, did you? For the,

Brad Beer:     I was on the floor listening, yes.

Phil Tarrant: Yeah, you were on the floor doing your thing, yes. So, you will remember that the government made so changes to depreciation in the last

Brad Beer:     Remember?

Phil Tarrant: Federal budget, you remember?

Brad Beer:     (laugh)

Phil Tarrant: And, at a point in time then there was quite a lot of noise around it for property investors. I was down there waiting for the information cause I was talking about some other major changes in terms of impacts on property investors, which didn't really come through, what come through though were changes in the way in which depreciation takes place. So we're moving in to federal budget time again. So, I don't know what's happening. I haven't heard too much noise about any changes that might happen moving forward, but there were some pretty considerable changes made last May, so ten months ago, around depreciation, which impacted predominately existing dwellings that's right Brad isn't it? So, did you, could you just recap what those changes were for us?

Brad Beer:     Yeah, for sure, I was at budget, same time and not expecting. You know, expecting some change in things for property investors so interested about that. But, just, you know, half way through a steak there was a very, like Scott Morrison started talking about depreciation changes and there was a bit of choking going on by me I think. (laugh) And, very actually left field and working with some government before, which is why I was there in the part. At the time I was a bit of a surprise to see that. But, simply, the changes are that, you know, depreciation's got two areas: one is a claim you get against the structure of the building, you know, division 43 boring terms that the tax office use for this. That relates to kind of the structural part of a building. To that there's no change.

            The thing they have changed is that when you buy a second hand property these other items that we call, or the tax office calls, planted equipment: the carpet, the stove, the host water service, the blinds, the curtains. Those things if you buy them second hand now, or if you buy a second hand property they're saying there's not a deduction associated with those things because they are second hand.

Phil Tarrant: Uh-huh (affirmative)

Brad Beer:     It's a bit of an odd change, because you know, the age or how old they are should be what governs the depreciation not whether they transact. But, they're just saying if it's one year old, or five years old, or 20 years old, we're putting that value down to zero and saying there is no claim associated with that second hand plant equipment. Those second hand plant equipment items from budget night.

Phil Tarrant: Okay, so, an item, plant equipment can only be depreciated once at the initial time of purchase by the first owner of the property.

Brad Beer:     And, so yes, brand new property you buy that one lot of depreciation. If you're someone who buys an item and adds it to your property later, you're buying that item and putting it in your second hand property then you get to claim depreciation against your new stove.

Phil Tarrant: Okay, so your new stove, new stove goes in, new kitchen appliances go in dishwasher all that sort of stuff, new hot water system goes in. So, if you replace an item or you add value to the property through the installation of plant and equipment, what is depreciable you can therefore depreciate that item.

Brad Beer:     Absolutely

Phil Tarrant: Okay

Brad Beer:     New items put in there are depreciated. Now, another key part of the change is that it's not only the purchase after that date it's the use almost after that day. Where if someone who actually lived in their property before and then turned it into an investment property after that date, then their items are seen as second hand as an investor as opposed to an owner occupier, and aren't able to claim the depreciation against those items either.

Phil Tarrant: It gets complicated.

Brad Beer:     Does get complicated, there's a lot of intricacies around the way it happened, or around the rules, and look the announcement on budget night and then through draft legislation, and you know, I was under find treasury a couple of days later and met with them later, and talked with them in between, and met with a lot of different politicians over the next six months to almost educate and say well, you're about to vote on legislation here and do you understand what you're doing, and I think the consensus was often not. And, saying look, here's probably the right way to do it from the industry who does the most of them in the industry by a long way. That one, that owner occupier piece is the one that I think is the most odd because they say that they grandfathered it, but it's kind of not a true grandfathering. Because some people bought a property, lived in it for a period of time, and then decided after, and had already probably thought they were going to move out of it and use it as investment property in the future

Phil Tarrant: Uh-huh (affirmative)

Brad Beer:     And they have actually been affected by those changes.

Phil Tarrant: So, by memory looking back at the time when these changes were made. We were in a very different property market than what we are today. A lot of government over site in relation to trying to decelerate the speed of price growth in Australia. We've spoke a lot about this. The perception that property is out of control and it's going up to fast in value. APRA come in they tried to restrict lending to try to slow investment down. This was one of the mechanisms, and I'm not here to criticise government in any way, but this is one of the mechanisms they thought would help reign in rampant price growth of properties and make housing more affordable, right?

            So, they thought that. A lot of people invested in property purely for depreciation and tax purposes, and this was one of the levers they pulled to try to and potentially slow it down. Fair call, fair comment?

Brad Beer:     Well, I think you said it was fourth or fifth on your list of things

Phil Tarrant: Absolutely

Brad Beer:     to consider, and I think that, I guess the debate from the other side of politics on negative gearing and does that impact on the affordability of properties and, you know, let's not get into that debate today. But, there's one there from the other side and I think the coalition thought here's a way to look at what they called an integrity measure,

Phil Tarrant: Yeah

Brad Beer:     which is the revaluing of that plant equipment and let's adjust that because we want it to be like the travel concessions is another piece of what they've done there, and they're trying to clean up and do things properly, and getting some budget repair out of that at the same time. I think, you know, the markets have slowed in those fast areas almost by that time, by the other changes. You'd almost say well if that's what you're going to do about it. Firstly, I don't think it makes enough difference for it to be enough of a change, and secondly, it's almost a case of too little too late. If you want to do something about rapidly increasing prices in Sydney, maybe you should do something at a macro level a little bit earlier. Provide some supply and things like that. I think there's a whole lot of levers to pull around an affordability debate. Band-aids is almost what we kinda got, because it's political parties making almost political decisions as opposed to sometimes ones that may be macro and need to happen. But, they're all hard ones as well.

Phil Tarrant: Yeah they are

Brad Beer:     So, I don't envy their position either.

Phil Tarrant: It's a big job there for someone to get their teeth into. There's a lot of noise around these changes and you mentioned very quickly they, at budget last year, they also changed the rules around, you know, travelling so that you their probably up in Brizzy and you can claim your flights and holidays and people were rorting it a bit.

Brad Beer:     I'd say that was the case

Phil Tarrant: Which is, I've never travelled to some of my properties for the sake of going on holidays, but anyway. A lot of people get sold properties on the basis of look you get, buy this place you get a tax break, great tax break. You get all the depreciation benefits and you get the free holiday every year, you know, it's not often the right way to be buying property

Brad Beer:     I think, I a hundred percent agree with you in that the sad thing is that there's legitimate people there that are travelling to fix something that a deduction is fair, but it's almost like if the system gets rorted then the government steps in, and the easy way for them to do that one was to knock it out completely.

Phil Tarrant: Just stop it completely.

Brad Beer:     And, look there was actually a gap in legislation in this depreciation legislation that I agreed with and I told them that and I gave them alternative ways to, I think, deal with the situation from a depreciation point of view. But, they're going maybe it's a little difficult and the result is the change we got.

Phil Tarrant: Mm (affirmative)

Brad Beer:     In November they actually finalised the legislation.

Phil Tarrant: Yeah, it took them a while. So, there was a lot of noise around this big change in depreciation, it's gonna change the way people invest, and what we're talking about is a very small component of it. I remember some numbers banded around it was like ten percent of the total depreciation is probably associated with plant and equipment. The actual building rules and regulations around depreciation in the building itself hasn't changed at all right? Hasn't changed.

Brad Beer:     No change. That building allowance is often 85 - 90 percent of the actual deduction you make. The difference is the plant and equipment was a bit higher deduction at the start.

Phil Tarrant: Yes

Brad Beer:     Most of the deductions are still there for a property investor, and you know, lots of questions we get get around, you know, is it still worth it? Can we get it? Well, I mean, you're as an accountant, or a property manager, or someone in the real estate space asking a client about have you done your depreciation properly you still ask exactly the same questions. Do you want eight thousand dollars instead of ten thousand dollars? And the answer is yes you do, in deduction, so you should still go through the same process and ask yourself the same questions.

Phil Tarrant: So, irrespective of the fact that this small part of the changes in depreciation has been made you still need to get a depreciation schedule?

Brad Beer:     Yeah, now the difference will be that there's some particular properties based on age that may not be worth it and we don't want to do one that's not worth it. We ask a few questions just like we did before the budget changes and we just gotta add a few more questions now and assess whether it's a valuable exercise and they're going to get some deductions before we run out there and do the depreciation schedule. 

Phil Tarrant: Okay, and new properties, it doesn't matter? It's all the same?

Brad Beer:     So, new properties have been excluded. So if you buy a brand new property you still get exactly, we do exactly the same thing we did before budget night. The other thing they've done with new properties is said look, if a developer is selling a project and they say they don't sell the rest of the project by the time it finishes, they can actually rent the property out for up to six months to someone. Providing they don't claim any depreciation as a buyer of that unit, you are seen as a new buyer and you get to claim depreciation as per normal.

Phil Tarrant: Okay, so I know you're all familiar with our portfolio Brad because you tune into the Smart Property Investment Show, and you've actually done a depreciation schedule for us on our portfolio and we've spoken about it before and it's also on the website smartpropertyinvestment.com that I use. You said something very early on in the chat about scrapping, and when you do a renovation you throw out stuff and you replace it with new stuff, and there's other depreciation components associated with renovating. So, these new rules under, which have been rolled out by the government, the legislation come out I think you said in November of last year so it's now all in the system. Has it changed the way we do renovations at all? Is there anything else we need to be thinking about when we're approaching a reno?

Brad Beer:     Look, the way, the changes they've made if you buy a secondhand property mean that that scrapping is not quite as good, unfortunately Phil, as it used to be. Because there were items that were second hand that you were putting a value on and then when you throw them away, you scrap them, you claim that residual value.

Phil Tarrant: Uh-huh (affirmative)

Brad Beer:     You put the new things in and claim depreciation on those after you do the renovation. In relation to the new things nothing's changed. You know, we update the depreciation schedule, fix it up, and claim those deductions. In relation to the things that you were going to throw away and scrap, if they were already there when you bought the property and secondhand then they'll be no deduction associated with those. But, Phil, I don't think you're going to go out tomorrow actually, now, I'm gonna completely change my investment strategy because I don't get to scrap. Scrap was a bonus, absolutely, and it was something you got as a deduction in that particular year, so it was great little kicker. But, the fundamentals of why you're investing in that particular property and doing what you're doing haven't changed, except for a little bit of cash flow in that period of time.

Phil Tarrant: Okay, and, if I bought this property before the changes come in to effect I can still get the scrapping though is that correct?

Brad Beer:     Absolutely

Phil Tarrant: So to what date is the important date then? Anything purchased before when?

Brad Beer:     Budget date, so the ninth of May at 7:30 if you exchanged a contract before then, you would do exactly what you ever did.

Phil Tarrant: Everything is grandfathered for perpetuity.

Brad Beer:     Unless you were living in the property as we said. But, an investment property that you'd exchanged contract and ended a contract to buy before then. If you rung me up today and said Phil, Brad, can you do a depreciation schedule? I'd say yes, we do exactly what we've always done in the past. It's only if you bought after that date went in to, we'd ask a couple more questions and provide a different type of depreciation report effectively. 

Phil Tarrant: Okay, and sticking on renos then, I should have done a depreciation schedule prior to the reno? So, then subsequent to the reno, do like, just say we use BMT, what do I call up and say I've just done some changes, this is what I've updated, can you update it? Or should you know before hand?

Brad Beer:     So, we, afterwards is fine. After you've done that renovation. If you just do a very simple, I mean

Phil Tarrant: Like fixing a kitchen, a bathroom

Brad Beer:     Adding a stove is a renovation effectively.

Phil Tarrant: Yeah true.

Brad Beer:     In my BMT, the portal we've got you can actually go an add your new stove and it fixes up your depreciation schedule for you.

Phil Tarrant: Okay, so you can do it yourself?

Brad Beer:     You can do it yourself with minimal amount of items. But, if we need to split it up, put things in the right place, and we need to have a look at it then obviously we'll fix it up and it's available back there when it's finished.

Phil Tarrant: Okay, and all these changes, these handful of changes really, to the way in which depreciation is undertaken. Is there any ramifications with like capital gains, tax or anything like that?

Brad Beer:     Yeah, this is where they've really made it quite difficult, and you know, there's a situation where that plant and equipment that you can't claim and if you're an accounting person start looking up a K7 event and an A1 event and read in detail. But, some of the, in some situations, the plant and equipment that you can no longer claim a deduction for, you may be able to adjust your capital gains tax at the end of the situation when you sell the property. Now none of these have happened yet. So, we're producing the numbers to see what that would look like, but most of the time these will actually cancel each other out and there's not really a financial benefit to doing that unless you scrap some items or you've got a CJT exemption. There's situations where you'll need these numbers, but on the bulk of them if you a novel investor, buy sell don't do any renovation in between, the numbers effectively cancel each other out. You make your other deductions in division 43 and there's no need to know about really the plant and equipment except separating it from the rest of it.

Phil Tarrant: Okay

Brad Beer:     So they've actually made it quite difficult to, because the accountants will treat it in a certain way when it comes, and it hasn't come yet because people aren't selling those properties yet, generally, if they've bought after budget night in May.

Phil Tarrant: So, a lot of people I know are obsessed, in a good way, with this sort of stuff and how it impacts their portfolio. They're right on the money, they, they're all over it. They know the impacts. They're down to the dollar, know why they, you know, being proactive in terms of taking a focused look at depreciation, where as, other people like myself go I know it's important and I can sort it out at a point in time, and I know when we've come to you to sort out our stuff, I've gone oh look I haven't done a schedule with like, I bought this thing two years ago, and

Brad Beer:     But you can back claim at least then for

Phil Tarrant: How long can you leave it for? So, if I've got a, so if I'm sitting here listening to this and I go I've got five properties I've never done a depreciation schedule. Number one you should check your accountant cause he's probably not doing his job properly right? But, there's not

Brad Beer:     Quite possibly (laugh)

Phil Tarrant: Like, when's it too late? When can I go back and fix it?

Brad Beer:     There's not a hard and fast rule of number of amount of how long you've owned that property as to whether you can go back. But, the, you can amend easily two years of your tax return.

Phil Tarrant: Okay

Brad Beer:     So, if you've owned it for two years it could be very happy days.

Phil Tarrant: Uh-huh (affirmative)

Brad Beer:     Now, your accountant may not be doing the wrong job because there might not be deductions on your properties. But, it's still always worth asking that question. If you've owned it for four years then you're only going to be able to amend the last two years in deductions, but you're not excluded cause you've had it for four years. If you've had it for 20 years, I've got to start a depreciation schedule 20 years ago. So it comes down to a whether it's actually financially viable to pay me to come and give you those numbers when you can only back claim two years and you've owned it for 20 and a lot of things may have been written off if you've owned that property for 20 years, and you can't go back and get it and you've missed out. But, it's stop, it's almost like the answer is sometimes don't worry about the age or how long you've had it.

            Ask a question about whether or not you're getting all the deductions out of the property that you possibly can for depreciation, and we can very easily give an indication of what those numbers should be and then you have a discussion with your accountant and say "well if I got 3000 dollars last year, how much did I claim? Only 500, well let's go change it."

Phil Tarrant: Uh-huh (affirmative)

Brad Beer:     And then we can go ahead and do something if it's worth it.

Phil Tarrant: So, we’ve spoken about a whole bunch of different sort of principles here like scrapping and CGT and all that sort of stuff. A lot of our listeners some are pretty sophisticated and they have large portfolios, some of them are new to the game and their minds probably boggling right now going what are these guys even talking about, and that's cool. So yeah, we wrote a lot about on smartpropertyinvestment.com.au so you should go and check it out, but If I'm one those people sitting there going I've got no idea what these guys are talking about but it sounds like I need to know about it; what do you do about it? Do you speak to your accountant, like how do you press ahead?

Brad Beer:     So, you have an accountant who's there to help you with your tax affairs. Firstly, there's, we have no issue with the discussion with the accountant. Sometimes they might, sometimes the accountant thinks oh it's old there might not be enough deductions there, but we've got so much information available with, and you've got it, we've given it to you in the past sometimes

Phil Tarrant: Yeah, yeah.

Brad Beer:     We've got it. There's a website that's there that's got detailed articles about scrapping. It's got white paper, a white paper, on the changes. We haven't even talked about, you know, what if a previous owner re-renovated and a few things about those changes we didn't get to.

Phil Tarrant: Yeah.

Brad Beer:     But, because there's the white paper if you want to get that detailed, and, but, if you've already got the property it's a matter of asking some questions, learning a bit about what it is and seeing if there's deductions there. I mean you don't have to be a depreciation expert. You're a property investor and that's what you want to be. Have the right experts around you to do well, and making sure you get the deductions that you're supposed to get. Start with the accountant, start with reading on the website, talk to my guys in the office. We'll talk to you about your property and see what you can get. Or also, when you're looking to buy, understanding some of those rules so you've got an understanding when you're looking at two properties that are two different ages next door to each other then you can go "well that one will get more deductions than that one." Or, we can tell you that very easily but, you know, your fourth or fifth in your decisions on depreciation later on your looking at all the other fundamentals first.

Phil Tarrant: Yeah.

Brad Beer:     Learn enough or ask the people enough questions so you can get the most out of investing in property, which is what you're trying to do in the first place.

Phil Tarrant: So, I'll finish with this Brad. What do you think is the biggest misconception around depreciation from investors? I don't know how many you said, 600 thousand, depreciation cases that's a bloody lot, yeah? So, what are the questions that you get at a property show you just sort of scratch your head and just go, like, I've been talking about this for years, and years, and years, and people still ask those type of questions. What's the biggest misconception?

Brad Beer:     There's two.

Phil Tarrant: Two?

Brad Beer:     The number one is, I've got a good accountant, don't they look after all that?

Phil Tarrant: Yeah.

Brad Beer:     And, our answer to that is really quite, very simple. We work alongside the accountant, we're specialists in depreciation, we give him one of the numbers on your tax return.

Phil Tarrant: Uh-huh (affirmative)

Brad Beer:     Very simple, and a lot of the time accountant has actually got it sorted out, but, you know, based on my experience a lot of time they haven't. Or sometimes the accountant has the second question not quite right, and the second most regular question is; Yeah, but my property's not new or I've got an old property do I still get deductions? The simple fact is all properties still gets deductions. It doesn't get as many. These budget changes mean some of those don't get as many again, but an old property still gets deductions. You should find out how much before you decide it's too old. If I tell you it's too old and you get nothing, then it's probably too old and you get nothing, but the client and the accountant sometimes, probably haven't gotten their head around some of those ways that it's done to get those deductions out of those properties.

Phil Tarrant: Okay. So, I'm gonna be in Canberra in, in for the next budget in May. You gonna be down there?

Brad Beer:     I don't think I'm gonna bother this time.

Phil Tarrant: No

Brad Beer:     (laugh)

Phil Tarrant: Do you reckon that's it, they're gonna leave depreciation alone?

Brad Beer:     They won't, they've done their changes to depreciation,

Phil Tarrant: Okay

Brad Beer:     And we don't see that many changes that often.

Phil Tarrant: Yeah

Brad Beer:     Especially not, this is the biggest one I've seen in the nearly 20 years in BMT.

Phil Tarrant: Okay, so it's gonna stay as it is?

Brad Beer:     I think it'll stay as it is.

Phil Tarrant: Status quo. I like status quo. Alright, Brad I enjoyed it. As I said we spoke in details of stuff there so if you've got any questions around that you can contact the team here [email protected] and I'm happy to pass it on over to Brad. You happy to answer some questions? If it comes through

Brad Beer:     Yeah, absolutely. Yes.

Phil Tarrant: Nice, and I know I've done some TV stuff and sort of like stuff on sky and I've sat on panels where someone will call up and go, they'll give me some convoluted scenario where it says this person bought it, and then they sold it to this guy, and we bought it this time, but it was in a part ownership and already had a place and blah blah blah. And I always go, I have no idea, so, if your question is really specific send it through and I'll make sure we get an answer for you. I'll even do it on air if you like, live. But go and check out BMT as well, you know, these guys do tax depreciations, you're the beast in the market right?

Brad Beer:     Yeah, yeah. We do by far the most depreciation schedules

Phil Tarrant: And that's a good thing, learn from their experience. Remember to check out smartpropertyinvestment.com.au. If you're not subscribing yet to our daily morning marketing challenge say you're the first to know in Australia what's happening, all the latest news and information and changes. Not with depreciation but to other stuff going on subscribe smartpropertyinvestment.com.au/subscribe. If you like to get any info from social media just search Smart Property HQ on any of the platforms. You can like us, follow us, love us, and comment if you like. Remember to keep those reviews coming on iTunes, I know you hear me sort of banging on the show all the time, but there is a big team behind us here who have a talent to the show who craft all this great content that we put together. So, please keep those reviews coming through wherever you're listening to it if it's on Apple iTunes leave a review.  Five stars. That's what we love, and any feedback again [email protected], and I pass it on. We'll be back again next time, until the bye bye.

Speaker 4:       The information featured in this podcast is general in nature, and does not take in consideration your financial situation or individual needs and should not be relied upon. Before making any investment, insurance, tax, property, or financial planning decision you should consult a licenced professional who can advise whether your decision is appropriate for you. Guests appearing on this podcast may have a commercial relationship with the companies mentioned.

 

Subscribe to get the latest news and updates - join a community of over 80,000 property investors.

Check this box to receive podcast updates

From the web