depreciation

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<p><img src="/images/2015/07/08/NBtax_PO_SponsoredLogoLink-01.jpg" alt=""></p>
<p>SPONSORED POST</p>
<p>Napier &amp; Blakeley this month are proud to launch NBtax, a breakthrough online property tax depreciation service to help property investors maximise their returns.  </p>
<p><span style="line-height: 1.3em;">Louise Hegarty talks with Chris Page, Napier &amp; Blakeley’s National Manager of New Projects about the revolutionary product that just had to happen.</span></p>
<p>“Over 70% of property owners under-claim their property tax depreciation allowances and many don't even claim them at all,” says Chris.</p>
<p>“It's a property investor's secret weapon for better cash flow yet sadly is widely misunderstood.  So we've created a simple solution that will help maximise a property investor’s return while making the whole process easier.”</p>
<p>Called NBtax, the online request service uses current technology to access Napier &amp; Blakeley's specialist property tax depreciation Quantity Surveyors.</p>
<p>“NBtax means investment property owners can start the process quickly and easily without the need to spend too much time going to and fro.</p>
<p>"Once you submit the required information, our expert teams get on with tailoring your property tax depreciation schedule, setting you up for the depreciable life of your investment.”</p>
<p>“We, Napier &amp; Blakeley, were the first in Australia to provide specialist property tax depreciation advice in the mid 80’s, and thirty years later we’re still the market leaders.</p>
<p>"A professional property tax depreciation schedule can boost your cash flow potentially by tens of thousands of dollars over the life of your investment.”</p>
<p>Yet many property owners stumble here, says Chris.</p>
<p>“A simple lack of knowledge and the specialist nature of depreciation means investors under-claim and at times even avoid the process often missing out on thousands. <em>A poorly calculated property tax depreciation schedule is mostly likely costing you money right now!”</em></p>
<p>And no property is too old or small to benefit, Chris adds.</p>
<p>“Commercial, residential or industrial, brand new, renovated or just old, every investment property has the potential to further increase your cash-flow.</p>
<p>There's money sitting there waiting to be claimed. It's just a matter of taking the first step in the right direction, and that's where NBtax comes in.”</p>
<p>We all know that reducing our taxable income means one thing – more money in our pockets. It’s now easier and faster than ever before – with NBtax.</p>
<p>To find out more about NBtax, <a href="https://www.nbtax.com.au" target="_blank">click here</a>. </p>
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NBtax is here, just in time for FY2015 tax time: Napier & Blakeley

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<p>GUEST OBSERVER</p>
<p><span style="color: #000000;">If you have been following my tweets and Facebook comments, you would have noticed that I have been very vocal about the new budgetary measures and, in particular, the new rules on plant and equipment depreciation.</span><br><br><span style="color: #000000;">Up until yesterday, it was obvious that large sections of the media were not aware of the full ramifications of what had been announced in last week's Budget.</span><br><br><span style="color: #000000;">Indeed, headlines last week claiming that “Negative gearing was left untouched” could not have been further from the truth. Ultimately, these headlines left me in a state of bemusement with sections of our media which is cause for a blog of its own.   </span><br><br><span style="color: #000000;">That all changed yesterday, where through the hard work of <em>Australian Financial Review</em> reporter, Su-Lin Tan, the full ramifications of what had been announced came to the fore via this front page story: Negative Gearing - Scalpel will cool apartment demand - experts</span></p>
<p><span style="color: #000000;">The new depreciation measures are significant as they massively reduce the ability of property investors to make deductions on their investment property, thereby reducing their ability to negatively gear. </span><br><br><span style="color: #000000;">These were the very words used by the Treasurer:</span></p>
<p><span style="color: #000000;"><em>“And from 1 July 2017, the Government will improve the integrity of negative gearing by disallowing deductions for travel expenses and, for properties bought after today, the Government will also limit plant and equipment depreciation deductions to only those expenses directly incurred by investors.</em></span></p>
<p><span style="color: #000000;">To give you an idea of the impact on investors, the mocked up depreciation schedules below clearly show what was normally claimed, with the columns circled in red showing what can no longer be claimed if these new measures are passed. Both schedules assume a circa $500,000 price tag on the properties.</span><span style="color: #000000;"><br></span></p>
<p><span style="color: #000000;">This first property assumes a newly built situation where a Division 43 allowance (depreciation on buildings) can still be claimed.</span></p>
<p><span style="color: #000000;"><a href="https://www.propertyobserver.com.au/images/2017/05/17/v1.jpg" target="_blank">Click to enlarge</a></span></p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/05/17/v1.jpg" width="700" height="559"></p>
<p><span style="color: #000000;">The second example is of an older style property where a new renovation has been completed.  Both these depreciation schedules have been provided with thanks to Mike Mortlock from MCG Quantity Surveyors.</span></p>
<p><span style="color: #000000;"><a href="https://www.propertyobserver.com.au/images/2017/05/17/v2.jpg" target="_blank"><span>Click to enlarge</span></a></span></p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/05/17/v2.jpg" width="688" height="580"></p>
<p><span style="color: #000000;">In both instances, plant and equipment depreciation are a significant component of the total deductible depreciation on a residential property. Literally, many thousands of dollars can no longer be claimed. Just keep in mind as well that these new changes only apply on residential property. Commercial property depreciation is still fully deductible.</span></p>
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<p><span style="color: #000000;">The effective result is that tens of thousands of properties that were cash flow positive properties after the depreciation benefit will no longer be cash flow positive, keeping in mind these affect property purchases after May 9, so there is grandfathering.</span><br><br><span style="color: #000000;">In its simplest terms, also consider the following scenarios:</span><br><br><span style="color: #000000;">Property A</span></p>
<p><span style="color: #000000;">I own a new unit that was just built. I can claim the significant plant and equipment depreciation that comes with newly built dwellings. However, if I sell to you that unit tomorrow, you can not claim the plant and equipment depreciation.</span><span style="color: #000000;"><br></span></p>
<p><span style="color: #000000;">At this stage, it is not clear regarding the plant and equipment depreciation  that If I own an off-the plan development that is not complete and I then flip it on to you (before completion) whether you can claim the depreciation or not. The Federal Government needs to clarify this situation.</span><br><br><span style="color: #000000;">Property B</span></p>
<p><span style="color: #000000;">I just bought a newly constructed unit after May 9, 2017. Normally, I would be able to claim the plant and equipment depreciation, however, at this point it is unclear under the new Budget measures whether I can going forward. A strict reading of the new measures suggests I cannot as it was the developer who originally purchased the plant and equipment.</span></p>
<p><span style="color: #000000;">This has been the view of some quantity surveyors while others believe the Government doesn’t intend to be so punitive. Once again, we are waiting for clarification.</span><br><br><span style="color: #000000;">Property C</span></p>
<p><span style="color: #000000;">I own an older style property on which I recently completed a renovation whereby I purchased $200,000 worth of plant and equipment. I then sell this property to you, today. You cannot depreciate any of the plant and equipment that I have spent money on during the renovation. </span><span style="color: #000000;"> </span></p>
<p><span style="color: #000000;">No further clarification is required here. This is exactly how the Government wishes the new measures to apply.</span><br><br><span style="color: #000000;">In my view, this new measure, combined with recent APRA initiatives, plus the potential for the banks to pass on the new bank levy, will very likely result in a drop in property investor demand. When that drop happens is uncertain. But it could start at any time given once these changes are passed by the Senate, there will be a retrospective impact back to the May 9, 2017.</span><br><br><span style="color: #000000;">So those people who purchased an investment property last weekend will likely be impacted by these new measures.</span></p>
<p><span style="color: #000000;">As quantity surveyor Washington Brown stated in their <span style="color: #000000;">blog</span> earlier this week, these new measures might actually have some unintended negative consequences for affordability in that:</span></p>
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<p><span style="color: #000000;">Property investors may now feel the need to hang onto their existing properties to continue claiming depreciation because if they sell that property they won’t be able to get as many deductions on their next one.</span></p>
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<p><span style="color: #000000;">Developers rely on high depreciation figures in the early years to show investors how affordable an investment property can be. If these depreciation allowances are taken away, they will struggle to get pre-sales which are required by banks to fund the deal.</span></p>
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<p><span style="color: #000000;">I am also concerned for investors in a new property as it is likely that any secondary buyer will demand a discount on a resale to take into account that lack of deductible depreciation, which is significantly large on new dwellings. It’s a similar issue we had with Labor’s policy on negative gearing during last year’s election. As it is, off-the-plan investors regularly experience price declines in new properties when selling in the first few years of the property's life.<br><br>These new measures may aggravate this reality which could then have a negative impact upon the supply of new housing stock in the long term. </span><span style="color: #000000;"><br></span></p>
<p><span style="color: #000000;">What the Liberals have announced is a light version of this policy in a way this will be a good test to see what would happen to dwelling prices and home affordability and rents under a no-negative gearing scenario.</span><br><br><span style="color: #000000;">Are these measures good for First Home Buyers? </span><br><span style="color: #000000;">In addressing the affordability question one must ask do these measures, plus others announced such as the additional superannuation contribution scheme, the additional CGT discount on ‘affordable’ properties, the tax break for senior empty-nesters to sell their homes, the additional land supply, create the incentive for first home buyers to come back into the market?</span><br><br><span style="color: #000000;">Well maybe, maybe not. Regardless, developers will need more first home buyers to take up the slack that investors leave behind. Potentially, first home buyers could do just that, which is what we all want.</span><br><br><span style="color: #000000;">But they kind of need to. And if they don’t, the rent rises that may well follow could just force them to.</span><br><br><span style="color: #000000;">This brings us to the final unintended affect – the rental market.</span><br><br><span style="color: #000000;">Note the recent trend in falling building approvals.</span></p>
<p><span style="color: #000000;"><a href="https://www.propertyobserver.com.au/images/2017/05/17/v3.jpg" target="_blank">Click to enlarge</a></span></p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/05/17/v3.jpg" width="243" height="300"></p>
<p><span style="color: #000000;">We are nearing the peak in housing completions in this cycle which we believe will be early 2018. Yet vacancy rates in Sydney and Melbourne are still tight.</span></p>
<p><span style="color: #000000;"><a href="https://www.propertyobserver.com.au/images/2017/05/17/v4.jpg" target="_blank"><span>Click to enlarge</span></a></span></p>
<p><span style="color: #000000;"><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/05/17/v4.jpg" width="700" height="384"></span></p>
<p><a href="https://www.propertyobserver.com.au/images/2017/05/17/v4.jpg" target="_blank"></a><a href="https://www.propertyobserver.com.au/images/2017/05/17/v5.jpg" target="_blank"><span>Click to enlarge</span></a></p>
<p><span style="color: #000000;"><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/05/17/v5.jpg" width="700" height="377"></span></p>
<p><span style="color: #000000;">This is happening because our population growth rates have exploded in recent years. Melbourne is now expanding by 120,000 people each and every year. Sydney's population is rising by 90,000 people. The growth rates are above and beyond what was expected and is causing systemic strains on our two largest cities.  For more on this I strongly recommend you read the recent blog on population from Macro Business </span><span style="color: #000000;"><br></span></p>
<p><span style="color: #000000;">Remember, this time last year there was a real fear of a unit oversupply. Forget that now for Melbourne and Sydney. There is no oversupply. And, depending upon how first home buyers respond to the Budget, there could be significant under-supply later in 2018-2019 which may cause rents to skyrocket.</span><span style="color: #000000;"><br></span></p>
<p><span style="color: #000000;">After all, rents in Melbourne are already well above expectations this year.</span></p>
<p><span style="color: #000000;"><a href="https://www.propertyobserver.com.au/images/2017/05/17/v6.jpg" target="_blank">Click to enlarge</a></span></p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/05/17/v6.jpg" width="700" height="389"></p>
<div><span style="color: #000000;">Our 2017 Housing Boom and Bust Forecasts</span></div>
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<br><span style="color: #000000;">It was reported yesterday that SQM Research may be revising down its 2017 forecasts as a result of the changes. After careful consideration, our <span style="color: #000000;">base case forecasts</span> <span style="text-decoration: underline;">stay un-revised for now.</span> </span><br><span style="color: #000000;"> </span>
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<span style="color: #000000;">However, we believe that the probabilities have substantially increased that a peak in the price growth rates of the Sydney and Melbourne housing markets will happen this current June quarter and that the September and December quarters will record slower growth rates. The possibility of a modest price fall in either the September or December quarter has also increased.</span><br><br><span style="color: #000000;">Subsequently, we now believe the lower end of our base case forecast range is likely to be reality. And, depending upon how and when the banks respond, we may revise our price forecasts down. For now, they remain on track with no current slowdown occurring in the housing market.</span>
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<div><em><span style="color: #000000;">Louis Christopher is a managing director of SQM Research. <em>He can be contacted <a href="https://www.sqmresearch.com.au/" target="_blank">here</a>.</em></span></em></div>
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Budget depreciation change to slow the market: Louis Christopher

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<p>GUEST OBSERVER</p>
<p>The property market has finally received some clarity in relation to the Government’s plan to reduce depreciation deductions for residential properties. It’s good news too, if you ask me. </p>
<p>On Friday 14th July, the Treasury Office released a <a href="https://treasury.gov.au/ConsultationsandReviews/Consultations/2017/Housing-Tax-Integrity" target="_blank">draft bill</a> regarding how depreciation deductions on second-hand property can be claimed moving forward. They also invited interested parties to make submissions.</p>
<p>It's complicated to say the least, so I’ve tried to simplify this Bill and the key points. Here are my 9 Key Takeaways from the draft Legislation;</p>
<p>1. If you acquire a second-hand residential property after May 10, 2017, which contains “previously used” depreciating assets, you will no longer be able to claim depreciation on those assets.</p>
<p>2. Acquirers of brand new property will carry on claiming depreciation exactly the way they have done so to date. This is great news for the property industry and the way it should be.</p>
<p>We suspected this would be the case and I believe the property industry can collectively breathe a sigh of relief. </p>
<p>3. The proposed changes only relate to residential property. Commercial, industrial, retail and other non-residential properties are not affected in the slightest. </p>
<p>4.  The building allowance or claims on the structure of the building has not changed at all. You will still need a Depreciation Schedule to calculate these deductions. This component typically represents approximately between 80 to 85 percent of the construction cost of a property.</p>
<p>5. The proposed changes do not apply if you buy the property in a corporate tax entity, super fund (note Self-Managed Super Funds do not apply here) or a large unit trust.</p>
<p>This is interesting and I suspect a lot more people will start buying properties in company tax structures.</p>
<p>6. If you engage a builder to build a house and it remains an investment property, you will still be able to claim depreciation on both the structure and the Plant and Equipment items. </p>
<p>7. If you renovate a property that is being used as an investment, you will still be able to claim depreciation on it when you have finished the renovations.</p>
<p>8. If you renovate a house, whilst living it in, then sell the property to an investor, the asset will be deemed to have been previously used and the new owner cannot claim depreciation.</p>
<p>9. Perhaps the most interesting point: Whilst investors purchasing second-hand property can now no longer claim depreciation on the existing plant and equipment, they will have the benefit of paying less capital gains tax when they sell the property. </p>
<p>How? Well, in summary, what you would’ve been able to claim in depreciation under the previous legislation, now simply gets taken off the sale price in the event you sell the property in the future.</p>
<p>Here is an example of how this will work: </p>
<p>Peter buys a property in September 2017 for $600k, included within the property was $25k worth of previously used depreciating assets.</p>
<p>As they were previously used, Peter can’t claim depreciation on those items.</p>
<p>Peter sells the property in 2022 for $800k, which included $15k worth of those depreciation assets.</p>
<p>Peter can now claim a capital loss of $10k ($25k-$15k) for the portion that Peter has not claimed in depreciation.</p>
<p><strong>SUMMARY OF THE PROPOSED CHANGES</strong></p>
<p>In my view the Draft Bill could've been a lot worse for both the property industry and the Quantity Surveying professions.</p>
<p>It will certainly address the integrity measure concern of stopping “refreshed” valuations of plant and equipment by property investors.</p>
<p>It may, however, create a two-tier property market in relation to new and second hand property.</p>
<p>You can see the ads now “Buy Brand New - We’ve Got The Depreciation Allowances”. </p>
<p>It will still be just as critical for all property investors to get a breakdown of the building allowance &amp; plant and equipment values so you can:</p>
<p>A. Claim the building allowance (where applicable) and</p>
<p>B. Reduce the CGT payable when selling the property by deducting the unclaimed Plant and Equipment allowances.</p>
<p>The Quantity Surveying industry, just like the property development industry just breathed a huge sigh of relief.</p>
<p>I believe this integrity measure could've been better addressed and will be making a submission accordingly. </p>
<p>But it wasn’t a bad ‘first run’ by the Government!</p>
<p><em>Tyron Hyde is a director of Washington Brown and can be contacted <a href="https://www.washingtonbrown.com.au/staff/tyron-hyde/" target="_blank">here</a>.</em></p>
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What depreciation property investors can now claim: Nine key insights from the draft legislation: Tyron Hyde

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<p><strong>Brought to you by</strong></p>
<p><img src="/images/marketing/frasersProp_black_rgb.jpg" height="50px"></p>
<p>Like a brand new car, new apartments and contents depreciate in value almost immediately but many investors are not aware of the depreciation benefits they are entitled to claim.</p>
<p>The Australian Tax Office enables investors to cover part of the purchase price by allowing them to claim depreciation on certain items like fittings and fixtures at the end of every financial year.</p>
<p>Although there is no percentage that fits all off the plan purchasers, Matusik Property Insights director Michael Matusik says up to 60% of the built cost of a new apartment can be tax-deductible over time.</p>
<p>Purchasers of off the plan apartments can take the contract of sale to a quantity surveyor to have a depreciation schedule put together, as the contract will detail inclusions such as price, size of the unit and size of the building.</p>
<p>A tax depreciation company can also inspect a property to determine the current value of every item and will then calculate how much value each of those items will lose every year for up to 40 years.</p>
<p>However, Multifocus Properties and Finance chief executive officer Philippe Brach says to get a definite schedule that an accountant can use, the property must be settled as the settlement acts as the starting date for the depreciation entitlement.</p>
<p>The depreciation report is submitted at the end of every financial year and is allowed to be back dated by up to two years.</p>
<p>BMT Quantity Surveyors director <a href="/expert-insights/finance/24589-investors-attracted-to-301142-park-street-south-melbournes-depreciation-tax-windfall-" target="_blank">Brad Beer says on average investors can claim between $5,000 and $10,000</a> as a first full-year deduction.</p>
<p>Brach says for the first few years, depreciation will fall away rapidly but is largely compensated by rising rent revenue in keeping the cash flow constant.</p>
<p>“After about 10 years, depreciation will stop declining but rent will still keep rising, therefore the cash flow starts increasing,” says Brach.</p>
<p>Property investor <a href="/expert-insights/finance/16155-the-benefits-of-depreciation-or-how-wear-and-tear-can-be-to-your-advantage-cameron-mcevoy" target="_blank">Cameron McEvoy</a> says the amount an investor can claim is always much higher in the first few years.</p>
<p>“It goes without saying that the figure for say year three, will be much higher than year 27.</p>
<p>“This is due to the gradual degrading value of items.</p>
<p>“More often that not, properties that are one to five years old have the most depreciable potential,” says McEvoy.</p>
<p>Brach advises that when looking at potential investment properties, fittings and fixtures should be taken into consideration when short-listing apartments as they will give high depreciation in the early years.</p>
<p>Off the plan buyers should be able to obtain a depreciation schedule from the developer free of charge to help them work out their numbers properly but if one is not available, a report can be constructed for around $300 to $1,000 through a depreciation specialist.</p>
<p>“Without a schedule, your cash flow may be way out of reality and you investment decision will be wrong,” says Brach.</p>
<p>The one-off report fee is also tax deductible.</p>
<p>{rsform 49}</p>
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How to: Check your depreciation entitlements

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<div>No surprise that the Reserve Bank of Australia opted to leave interest rates on hold at 2% yesterday, preferring to "wait and see" how data flows play out in the months ahead.</div>
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<div>Not all that many surprises in the <a href="https://www.rba.gov.au/media-releases/2015/mr-15-11" target="_blank">media release</a> either in truth. </div>
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<div>Perhaps the most notable point was this:</div>
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<div><span><em>"<span>The Australian dollar has declined noticeably against a rising US dollar over the past year, though less so against a basket of currencies. Further depreciation seems both likely and necessary, particularly given the significant declines in key commodity prices."</span></em></span></div>
<div><span><em><span> </span></em></span></div>
<div>Although the Aussie dollar has touched a six year low against the US dollar at 74 cents, with commodity prices in an ongoing funk, the Reserve Bank wants to see further depreciation still. </div>
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<div><a href="/images/2015/07/08/audusd.jpg" target="_blank">Click to enlarge</a></div>
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<div>Just how much further depreciation is open to interpretation, but given the strength of the wording one might safely assume that this means at least 10 per cent, and probably more.</div>
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<div><span>With the release also noting that "<span>monetary policy needs to be accommodative" there is every chance that interest rates will fall again at some point within the next year.</span></span></div>
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<div>Futures markets are all but pricing in another cut over that time frame.</div>
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<div><a href="/images/2015/07/08/RBA.jpg" target="_blank">Click to enlarge</a></div>
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<div><img src="/images/2015/07/08/RBA.jpg" alt=""></div>
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<div><strong><span style="text-decoration: underline;">Asset markets</span></strong></div>
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<div>The ASX 200 (XJO) surged by well over 100 points for no apparent reason to record its second strongest trade of the year to date.</div>
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<div>Another interesting development this week has been lenders tightening the screws further on investor loans.</div>
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<div>As of today Westpac - the Australian bank with the largest dollar amount of credit outstanding to investors - will reportedly apply a maximum 80 per cent loan to value ratio on its investment loans.</div>
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<div>This will make it comparatively more difficult for investors without substantial deposits to purchase property.</div>
<div> </div>
<div>To compensate we can expect that some lenders will instead encourage owner occupier loans, perhaps by dropping lenders mortgage insurance in some instances, or by dropping standard variable rates in others.</div>
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<div>The regulator APRA has evidently applied heavy pressure to banks and other lenders to slow the pace of credit growth to investors, and therefore the outlook for our property markets will shift accordingly over the period ahead.</div>
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<br>With rock bottom interest rates all but assured through 2015 and 2016 we can expect to see a shallower but probably longer recovery in property markets, driven increasingly by owner occupiers.</div>
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<div>Another point of interest is that certain capital city markets have already been distorted by a steady flow of foreign capital, while simultaneously we also have a central bank which wants to depreciate the currency by a further 10 to 20 per cent. </div>
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<div>This may well be the action which opens the sluice gates...just sayin'.</div>
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<span><em>PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.</em><br></span>
<p><em>His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.</em></p>
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No surprise from the RBA: Pete Wargent

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<p>An independent depreciation assessment of the four apartments up for auction next week has identified significant potential deductions for <em>The Block</em>’<em>s</em> buyers.</p>
<p>BMT Tax Depreciation has undertaken a depreciation assessment on each of the <a href="https://www.urban.com.au/property-observer" target="_blank">Albert Park</a> apartments completed on this season of <em>The Block</em> and found that each offers major deduction opportunities, with potential first year deductions of about $50,000.</p>
<p>According to BMT Tax Depreciation managing director Bradley Beer, the renovated properties could be underlying goldmines for buyers. </p>
<p>"An investor purchaser could claim a minimum of $46,281 and a maximum of $53,995 as an average first year depreciation deduction for one of the four properties," said Beer.</p>
<p>Beer says that despite legislation allowing all owners of income producing property to claim depreciation deductions for the wear and tear of their property and its contained assets, 80% of property investors fail to take full advantage of their depreciation deduction entitlements.</p>
<p>"Investors who don't claim depreciation are missing out on thousands of dollars in their pockets," said Beer.</p>
<p>BMT Tax Depreciation also prepared depreciation reports for the 2012 and 2013 <em>Block</em> properties.</p>
<p>The four apartments on O’Grady Street in Albert Park will be auctioned on Tuesday April 8, with the results airing on Channel 9 on Wednesday April 9.</p>
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Hidden depreciation opportunity for The Block: Fans v Faves properties

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<p>Depreciation is a paper-cost that investors are increasingly savvy about, however like any industry, not every depreciation schedule is made equal and some quantity surveyors are more thorough than others. This may mean that your deductions are no where near where they should be, explains BMT Tax Depreciation managing director Bradley Beer.</p>
<p>In a recent conversation with <em>Property Observer</em>, Beer explained that a quantity surveyor’s ability to spot renovation that may have been done before an investor purchased, or knowledge of when something looks out of place, can quickly help push up the claimable items.</p>
<p>Those who self-assess without the knowledge or property diligence, or estimate costs on their own judgement, may be missing out.</p>
<p>He also recently said that two types of deductions are regularly missed – capital works deductions and plant and equipment depreciation.</p>
<p>Beer pointed to the recent ATO stats, where 2.5 million of Australia’s property investors claimed deductions over 2011/2012. Just one million received an average capital works deduction of $2,029, which 1.7 million claimed an average plant and equipment depreciation deduction of $1,139.</p>
<p>“A total depreciation claim of $3,168 on average is well below the typical claim found for residential investors who request a BMT Tax Depreciation Schedule. 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 ten years of owning a property,” said Beer.</p>
<p>While not all can claim capital works deductions due to restrictions reliant on construction commencement date, plant and equipment deductions can be claimed regardless of the age.</p>
<p>“We’re continuing to see a trend that suggests the owners of older properties don’t claim the maximum capital works deductions available. Older properties have often had renovations completed. Even work completed by a previous owner of the property can be claimed as a capital works deduction by the current owner,” he said.</p>
<p>Observer Terry Ryder wrote today that depreciation is "<a href="/expert-insights/31561-the-single-biggest-missed-opportunity-by-property-investors-depreciation" target="_blank">probably the single biggest missed opportunity by property investors</a>".</p>
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How much should your depreciation deduction come to? Perhaps more than you think

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<p class="Body">Property investors do many strange things. They act impulsively, rather than methodically. They dive in without a plan. They make decisions without research. They’ll listen to family members and ignore professional advice.</p>
<p class="Body">But the strangest of all the conduct I see from investors is that they will splurge hundreds of thousands of dollars to buy real estate, but refuse to outlay a few hundred dollars to ensure they buy wisely or maximise their return.</p>
<p class="Body">Many investors are too lazy (they say busy) to conduct research and too stingy to pay for someone else to do it. Rather than spend a few hundred dollars for professional advice on the price they’re paying, they’ll risk losing tens of thousands by paying too much. They’ll seek to save small change by doing their own inspection, rather than paying a qualified building inspector to ensure there are no issues which could cost tens of thousands to fix.</p>
<p class="Body">One of best outlays an investor can make – but one most investors don’t do – is to spend $700 or so on a depreciation schedule which can improve the bottom line by many thousands of dollars each year.</p>
<p class="Body">ATO statistics show most Australians who own investment property don’t claim depreciation or fail to maximise their claims. It’s probably the single biggest missed opportunity by property investors.</p>
<p class="Body">According to Brad Beer of BMT Tax Depreciation, calls it “hidden cash flow for property investors”. But three-quarters of investors get less than they should in allowable claims.</p>
<p class="Body">It’s clear most punters fail to fully understand depreciation and how much it can change the bottom line for an investment property. Many still believe that you need to buy new to get depreciation benefits worth claiming.</p>
<p class="Body">ATO figures show property investors will readily claim body corporate fees, agent fees, council rates, borrowing expenses, interest on loans, repairs and maintenance – but miss out on capital works deductions and plant and equipment depreciation.</p>
<p>Beer says 2.5 million property investors claimed deductions in the 2011-12 financial year. Of these investors, about a million received an average capital works deduction of $2,029 while 1.7 million investors claimed an average deduction of $1,139 for plant and equipment depreciation. That suggests a total depreciation claim of $3,168 on average.</p>
<p>And that is well short of what’s achievable. Too many people, it seems, are doing it on the cheap. But rather than saving money, they’re losing thousands per year.</p>
<p>Beer says data collected from tens of thousands of depreciation schedules prepared by BMT suggests the average claim should be around $10,100 in the first full year and $7,350 per year on average over the first 10 years of owning a property.</p>
<p>My own experience with investment properties confirms that. I always get a quantity surveyor to prepare a proper depreciation schedule for each property – and that one-off outlay can be used for the life of the property, with long-term savings of tens of thousands of dollars.</p>
<p>But I regularly meet investors who don’t claim depreciation at all.</p>
<p><em><em><em>You can contact Terry via <a href="https://mailto:ryder@hotspotting.com.au" target="_blank">email</a> or on <a href="https://www.twitter.com/hotspotting" target="_blank">Twitter</a>.</em></em></em></p>
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