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Frequently Asked Questions
About Tax Depreciation
Here are the answers to common queries relating to Tax Depreciation:
- Doesn’t a Tax Depreciation Schedule only apply to new properties?
This is a common misconception - no matter what its age
as a property and its inclusions have a value and an 'effective life',
meaning it can decrease in value or depreciate from where it already
is. This depreciating value applies just the same as if it were new,
just at a lower initial value.
- If
my property is a few years old. Is it worth depreciating?
Yes it is. There is a great deal of depreciation in properties
that have been renovated. All the new appliances, fittings, fixtures, consultant's
fees and labour costs are completely deductible. There are a number
of dates that affect these rates.
- If my property was built
before 1985, can I still depreciate on?
Absolutely. Everything in an investment property has an effective
life and therefore is eligible for depreciation. The 1985 rule applies
to another component of depreciation on the construction cost.
If your
investment property was built before 1985 you don't qualify for the
flat 2.5% depreciation for 40 years. The good news there is often thousands
of dollars worth of inclusions aside from construction that you can claim.
- Can I claim the renovations in
my property if I didn't arrange them?
Yes you can. Anything in the property that appears to be part
of a renovation will be valued by us and depreciated accordingly. That
goes for the hidden materials new wiring, plumbing, water proofing etc.
You don't need receipts either; we have the expertise to value
everything that makes up the property.
- Does
depreciation affect capital gains tax?
Another yes! Claiming the complete depreciation allowances on
your investment property does not adversely affect your capital gains tax
position. You are free to claim all deductions and CGT rulings remain the
same.
You will however be required to add your capital allowance deductions
to your capital gain when and if you decide to sell your investment. Remember if you hold the property for longer than 12 months you may be entitled to the CGT discount.
Keep in mind that the additional cash flow available from your depreciation
can be utilised for additional repayments, adding value to your asset or
as a guard against future vacancy. If you consider the indexing value, the
money you receive from depreciating is worth far more today than some time
in the future.
- What happens at tax time?
When you receive your tax depreciation schedule, you simply take
it to your accountant. They will advise you on which depreciation method
you should use (we provide both methods) and it is lodged with your tax
return. The schedule remains valid for this entire time and there is nothing
further for you to do. Simple!
- How much does will it cost me?
If the property is in our listed areas, the
fee is just $540 inclusive of GST.
For your fee, you receive a bound report of approximately 16 pages, containing
- Photographs of Building and Plant
- Sketch plans drawn on AutoCAD where required
- All historical research required
- Both Prime Cost & Diminishing Values used (your accountant will
tell you which to use)
- Breakdown of plant & articles
- Backdated reports to date of purchase (although you can only claim
previous 4 years)
- Schedules for depreciation allowances for the next 40 years.
Your savings can amount to tens or even hundreds of thousands of dollars
over the life of the property, and as our fee is itself a tax deduction,
you owe it to yourself to call TSL to book your site survey and report.
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