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10 Tips for tax depreciation

If you have an investment property in Australia, here are my ten tips for tax depreciation that will help you determine the depreciation and improve your cash flow.

Tip 1: Maximize the cost of construction

When the depreciation of an investment property, the cost of original construction must be used. Many of our clients are buying properties at prices substantially reduced â € "closer to the original construction cost.

So, the point is to maximize current conditions market and search for properties where the actual construction cost is close to the actual purchase price.

For example, we had a customer who bought property in sydneyi € ™ s western suburbs of $ 250,000 recently. There were two, two bedrooms. We were the riggers on the project â € "and I know that the original construction cost of this unit was $ 175,000. But the purchase price – a new â € "was $ 335,000.

You know Why? We use the initial construction cost as the basis for property investor.So volume has not only the new owner to pay less stamp duty and increased their potential for capital gain â € "your deduction for depreciation of the purchase price has also increased.

€ So this property is cash flow neutral at worst, a "positive cash flow at best.

Tip 2: Housing too amortization

Even buildings built before 1985 (when construction started on compensation) worth depreciates. The purchase price of your property including land, buildings and plant and equipment.

As a surveyor we help you split or break these categories. In about 99% of cases, finding enough plants and items of equipment to justify the expense of our company car.

Tip 3: Use the Washington Brown amortization calculator fiscal

For property investors for the first time can obtain an estimate of the tax deductions that can be the depreciation of a property before buy.

So you as an investor, you can use our free, charging the web, and comparing apples to oranges and see what works best for you.

For example, you might consider buying a property for 5 years of age, but is concerned, depreciation deductions Wona € ™ t be as high as a new building.

Our calculator instantly estimates of what the difference is be.This simulator uses real data collected for each inspection we do on behalf of our clients. While data are more accurate over time.

Tip 4: The largest building in the highest depreciation

Buildings and equipment facilities to attract more allowancesâ € | and more facilities and equipment, plus depreciation.

Plant and equipment relates to the services needed in the building as well as articles on the property itself.

Some of the services that the buildings necessary to increase the height are obvious, like an elevator (transport service). Other services are less obvious, with the fire hose reels and all the intercom is negligible in this category.

The other because of tall buildings have a higher proportion of facilities and equipment have to do with the comfort Developer provides. For example, some tall buildings have pools, gyms and even mini-cinemas.

Note that a large building doesn € ™ t necessarily a better investment. This often means that ll ™ € be taken and additional charges, and you have less land also. But at the end of the day, Itâ € ™ s up to you to weigh the pros and cons € | and make the final decision!

Tip 5: small objects and low-value-set in common

A dollar today is worth more than a dollar tomorrow, so we deduct the items as quickly as possible. Individual items under $ 300 can be canceled immediately.

One important thing to remember here is that if his party is less than $ 300, you can still recover.

For example, say an electric motor for garage door cost of an apartment block $ 2000. If there are 50 units in the block, their share is $ 40. You can only absolute claim $ 40 â € "As in his party is less than $ 300.

You can also try to buy items that depreciate quickly. Articles 300 to $ 1,000 and the fall in the category of low water and a higher rate of depreciation. For example, a television attracts a deduction from $ 1200 20%, while TV $ 950 withheld by 37.5% per year.

Tip 6: Dona € ™ t worry on depreciation DIY

As an expert in the market, I am puzzled by the number of companies offering do-it-yourself option. I personally I think there are legal anomalies here, but more importantly â € "I think I will miss your deductions.

Liena € ™ is a example. The options on the market to give yourself a tick sheet and asked to take their own measures. Leta € ™ ya! s words, to measure a wall of the room to another. If you are around the house â € "should be owned 10% reduction in gross area. At about $ 1,500 per square foot to build, you missed something as well as 15,000 dollars worth of tax deductions!

But nâ € ™ t Take That from me ….

The Director General of the Institute Quantity Surveyors Australian, Terry Sanders said, â € œThe AIQS has developed guidelines for the preparation of reports for depreciation of assets by the qualified quantity surveyors designed to assure homeowners to obtain a complete and professional meets requirements.â atoa € ™ s €

He added that owners of trying to estimate their own depreciation or use the amount described risk topography present an incomplete or poorly depreciation that â € œâ € | not just the costs in lost deductions, but also could attract a possible audit by the ATO if their relationship is not required.â rules is €

Tip 7: the claim to remove any residual

I believe that millions of dollars not be achieved in future years, depreciation, tax credits, due to changes in what can be defined as â € ~ plant and equipment € ™.

When I started to prepare reports for amortization, There were several factors in determining what made the list. Including whether the problem was quite ensure that the assets available to be leased. For example, a kitchen is a must â € "but a microwave wasn € ™ t.

So the moral of the story of ISA € | If you are the renovation of a kitchen or bathroom in a property built after 1985 â € "get a rigger in front of you, so you can evaluate what demolish the residual value of these items.

This value can claim as a deduction pure and simple, and can generate significant savings in the first year. For example, a rental property 20 years of age in the kitchen attracts 10,000 dollars an immediate deduction of about $ 5,000.00.

Tip 8: Provide your property

Delivery of your property is another way to increase your deductions for depreciation, as it attracts the highest rate of depreciation.

For example, it was estimated that a package of furniture $ 20,000 provided by a developer can result in an additional deduction of $ 10,000 in the first year alone.

In addition to his other furniture options amortization can actually improve their overall demand.

According to Rob Farmer, director general of enforcement of property, a typical apartment in Bondi Beach, for example, can attract up to $ 100 extra rent per week. But he warned that the team as nâ € ™ t necessarily the best investment option for all properties and places.

Câ € ™ is best suited for small one or two bedrooms in the transitional areas that attract tenants and short term rentals holiday.

Council 9: No to the properties of a building with 4% Allowance

Residential Properties manufactured between 18 July 1985 and September 15, 1987 attracts 4% of the depreciation rate of construction. Everything built since then attracts a rate of 2.5%.

Thus if you buy a property built in 1986, this means that 23 of his 25 years ate utility (from 2009 to 1986). You will be able to recover the residual gap for the next two years at 4%. However, if you buy a property in construction began in 1989, has another 20 years to amortize the Good, to 2.5%. Thata € ™ s 50% of the initial construction cost for the left â € "compared to only 8% – I know which I prefer!

Tip 10: Using an e quantity surveyor xperience

To begin â € "Leta € ™ s put this issue in perspective € | you have to pay hundreds of thousands of dollars for a â € "the property you really want to save hundreds of dollars of tax deductible Tax breaks only available that can be interpreted and jurisdiction?

The laws have changed frequently over the years and each building is unique, so it pays to get expert advice. I suggest you hire a company that has been around for at least 10 years. They have the expertise to analyze your property correctly.

The ATO Surveyors identified as duly qualified to assess the cost of initial construction in cases where this figure is unknown.

Note â € "his accountant, realtor and appraiser is not qualified to make this assessment in accordance with the ATO.

Happy Investing.

About the Author

Tyron Hyde, is Director of Washington Brown Quantity Surveyors based in Sydney, Australia. He is one of Australia’s leading experts in property tax depreciation and is regularly quoted in the media and speaks at conferences on the topic of tax depreciation and property investment.

http://www.washingtonbrown.com.au/

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