Depreciating Assets

<html><body><div class="page" title="Page 5">
<div class="section">
<div class="layoutArea">
<div class="column">
<img src="/images/2016/06/22/D819360E-D22F-45A0-950B-1527D8EA443823.png" alt="">
SPONSORED POST
You can claim a tax deduction for some of the expenses associated with owning a rental property in the year in which you incurred them, but others must be claimed over time.
DEPRECIATING ASSETS
Items that will wear out and need to be replaced, such as carpets and appliances, need to be depreciated. This means you claim the cost of the item over its expected lifespan.
The Australian Taxation Office has published a list of the timeframes for depreciating common items found in rental properties.
For example, the ATO suggests carpet should be depreciated over 10 years and floating timber doors over 15 years. Gas or electric hot water systems can be depreciated over 12 years, while the suggested lifespan of solar hot water systems is 15 years. The ATO suggests cook tops, ovens and refrigerators should be depreciated over 12 years.
You can use the ATO’s suggested timeframes to claim depreciation or, in some cases, you can make your own estimates.
If you want to use your own estimate of the e ective life of a depreciating asset, you’ll need to be able to back up your claims with information such as the manufacturer’s specifications, engineering information or common practices for scrapping the item.
The item’s lifespan starts from when it was new, not when you started claiming deductions. If you install second-hand items, you’d have to consider their lifespan since new, not since you bought them.
CAPITAL WORKS
If your rental property was built after July 17, 1985, you may be able to claim a deduction for construction costs, known as a capital works deduction. 
Capital works deductions are usually claimed at a rate of 2.5 percent t a year for the 40 years after construction. They cover expenses for buildings, extensions such as garages or patios, alterations such as kitchen and bathroom renovations and structural improvements including carports, sealed driveways and fences.
Assets that are considered to be part of the building must also be depreciated as capital works.
This includes:
• Cabinets, sinks and xtures in kitchens and bathrooms
• Built-in wardrobes
• Tiles and other oor coverings that can’t easily be removed without damaging the building
• Insulation
• Fly screens and awnings
If you want to claim for capital works, you’ll need records of the construction dates and building costs, details of who carried out the works and the type of construction.
If you don’t have access to these details, you can hire a quantity surveyor, architect or builder to supply this information. 
To download a free ebook on new financial year taxation tips for property investors,<a href="http://propertyobserver.com.au/forward-planning/tools/ebooks-and-webinars/55208-new-financial-year-tax-planning-tips-for-property-investors" target="_blank"> click here</a>.
</div>
</div>
</div>
</div></body></html>

po-LsXgBTHBmX

Claiming a tax deduction for rental property ownership expenses

<html><body>
The May 9 federal budget proposed changes to the way property investors claim depreciation, but it is not all bad news, according to quantity surveying firm Washington Brown’s CEO and director Tyron Hyde.
Explaining the changes in a recent webcast, <a href="https://washingtonbrown.pages.ontraport.net/budgetchanges" target="_blank">Hyde alluded to the changes from July 1</a> when government will limit plant and equipment depreciation deductions to what is actually incurred by investors in residential properties.
Pointing out that the key was “actually incurred”, it just means that if an investor bought a second-hand property it probably means that he did not buy some of the equipment like the oven or dishwasher which the earlier owner or the developer may have bought.
So, as the investor didn’t actually incur that expense, it can't be claimed as depreciation.
Depreciation is a tax deduction for the <a href="https://www.urban.com.au/guides/59939-four-property-depreciation-myths-that-investors-need-to-know-washington-brown" target="_blank">wear and tear </a>on an investment property over time and recognises the fact that the building itself, as well as its plant and equipment will become worn out over time and eventually need to be replaced.
Plant and equipment in a building are things like the ovens, the dishwashers, the carpets. The other part of a report of depreciation schedule is what’s called the Division 43 allowance. That’s the building allowance. That’s the structure of the building, that’s the brickwork, the concrete, the windows etcetera.
To make a claim those allowances, the property has to be built after 1987. 
The silver lining is that the proposed changes are grandfathered, meaning if an investor bought a property prior to the budget, nothing changes.
“If you exchanged contract, let’s be clear on this if you exchanged a contract prior to the budget, nothing changes,” said Hyde. 
He added that if an investor already has a depreciation report, he can claim exactly how it is.
So an investor bought a property two years ago but didn’t get a depreciation report, it would be helpful to get it now because the old rules will be applied before the commencement date for changes.
In fact, Hyde suggested that if a property three years ago or two years ago, and haven’t got a report, now would be a good time to do that.  
“You can actually amend tax returns to factor in that property that you haven’t claimed, so you can actually amend your tax returns for a two-year period.”
</body></html>

Depreciating Assets

Editor's Picks

Have something to contribute?

Developments

New apartments

New townhouses

News

Depreciating Assets

Editor's Picks

Receive the latest news stories to your inbox

Have something to contribute?

Developments

New apartments

New townhouses

News