For property investors, it is important to maximise the depreciation claims available for their properties. After all, if you can reduce your tax payments, you'll usually have more capital available to make further property acquisitions and expand your portfolio. One potential depreciation claim that is often overlooked by property investors is the deduction for outdoor structures, fixtures and fittings. To provide some more information about this topic, I've decided to share the following piece by Managing Director of BMT Tax Depreciation, Bradley Beer, which appeared in the February 2013 issue of Century 21 Wentworth's Property Investor.
OUTDOOR APPRECIATION INCREASES DEPRECIATION – CLAIM DEDUCTIONS ON OUTDOOR STRUCTURES AND SAVE
When it comes to claiming depreciation on investment properties, many investors are unaware of the deductions that are available on outdoor structures, fixtures and fittings.
Items outside of a building can add value to a property. Rather than ignoring the street appeal, investors can include items in the yard or outdoor area to help attract potential tenants. The investor can then maximise their deductions by claiming depreciation on the eligible items in the front yard, backyard and balconies of their properties.
Deductions can be claimed on these outdoor assets as either capital works allowance or plant and equipment depreciation.
Capital works allowance, also known as a building write-off, is based on the historical cost of a structure, excluding the cost of plant and non-eligible items. Outdoor structures which qualify for the capital works allowance include retaining walls, fencing, sleepers, concrete slabs, patios, clothes lines and in-ground pools.
Plant and equipment items, including removable or mechanical assets, are also eligible for depreciation deductions. Each plant and equipment item has an effective life set by the Australian Taxation Office.
The depreciation available on each item is calculated using the effective life. Some depreciable outdoor plant and equipment items commonly found outside a property include outdoor furniture, garden sheds, garden hoses, solar lights, pool filters and pumps, and garden watering systems.
Assets outside of a property can be worth thousands of dollars. Investors should take special notice when old assets including retaining walls, garden sheds and driveways are removed and replaced during a renovation. They may be entitled to claim 100 per cent of the unclaimed value as a deduction. A specialist quantity surveyor is qualified to calculate values and construction costs of these items and can ensure that investors are not throwing dollars away.
Article Provided by BMT Tax Depreciation.
Bradley Beer (B. Con. Mgt, AAIQS, MRICS) is the Managing Director of BMT Tax Depreciation.
Please contact 1300 728 726 or visit www.bmtqs.com.aufor an Australia wide service.