TAKE ADVANTAGE OF DEPRECIATION ON YOUR INVESTMENT PROPERTY.

Depreciation on investment property is one of several tax-saving methods available to Australian property investors. This is an excellent opportunity for property owners to reinvest some of their tax money.

Investment property depreciation scheduling is one of the best tax saving options offered to Australian property investors. This is a terrific chance for property owners to reinvest some of their tax money in their investment, it is not widely known. Today, we'll go over some of the most asked issues about depreciation schedules and help you determine if you're entitled for additional tax breaks.

What is property depreciation on your investment?

Most investors buy property for long term capital gain. Knowing how to claim assets will help you enhance your cash flow and lower your annual holding cost, allowing you to invest in more property and expand your asset base. like any tax benefits, might change or be taken away any time, you should always run your numbers before tax and grab the benefits like

depreciation.

What is depreciation?

When it comes to property investment, the ATO permits you to deduct the cost of maintaining your asset from your taxable income. This covers things like the interest you pay on your mortgage, the upkeep you do on the house, and the ‘depreciation' of the property itself.

The term "depreciation" refers to the loss of value of any asset that generates revenue. When it comes to real estate, this could refer to an investor's rental property or a company location (such as a mechanic's workshop). Until recently, depreciation could be claimed on both the building itself (or ‘capital works' allowance) and the ‘plant and equipment' within the structure that was susceptible to wear and tear. The oven, carpets and drapes, air conditioning systems, and other items may fall into this category. However, changes to depreciation regulations were introduced earlier this year that would affect some homes — but more on that later.

A Depreciation Schedule can be completed by a licenced Quantity Surveyor.

Why is it important to claim depreciation?

You can deduct the value of your assets as they depreciate overtime from your taxable income. For property investors, this will help with a reduction in tax due, which makes it a critical component of the investment equation.

Depreciation is an incurred expense that every property investor will face. Therefore, it is a legal deduction that should be taken advantage of. Due to the lack of understanding of depreciation, many thousands of Australian property investors pay more tax than they should.

When you reduce taxable income, your cash flow improves, which also adds value to creating a larger property portfolio. After all, the more revenue you have to work with, the better position you'll be in to expand your investment portfolio with more property.

Recent Changes to depreciation.

The government made changes to the deprecation legislation which will affect all property investors after May 9th, 2017. As a result of the new legislation, investors will no longer be able to claim depreciation on plant and equipment within their investment properties. This includes equipment such as air conditioning systems and ovens. It is estimated that the average investor will lose more than $4000 in depreciation reductions per year for the next five years.

Although this is a setback for anyone looking to invest in real estate, depreciation is still an aspect to consider. For property investors, the capital allowance component of the depreciation reduction might still result in large discounts.

In fact, these deductions account for 90% of most investor deduction claims and include things like structural features of the property as well as any fixed objects like doors, windows, cupboards, showers, basins, and more. Changes in depreciation legislation should not deter investors from taking advantage of this taxable income reduction.