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What are your clients missing out on? Bradley Beer

The past two years' missed depreciation deductions total $26,286

Specialist Quantity Surveyors often receive enquiries from investment property owners who have owned and rented out a property for a number of years and they have not claimed or maximised their depreciation deductions. As many investors remain unaware of depreciation deductions, it can be quite a disappointment when they discover the thousands of dollars that may be too late to claim.

The good news for your clients is that the Australian Taxation Office (ATO) allows tax returns to be adjusted for two years after the initial submission. This enables property owners to recoup some of the deductions that may have been missed. To assist property professionals with explaining the process involved in requesting an amendment of an investor client’s previous tax returns to include depreciation deductions, let’s take a look at a scenario in which an investor purchased an eight-year old home for $485,000 on the 1st of July 2011. In the scenario, the owner had privately rented the property on settlement and at the time was not aware of the depreciation benefits available.

Recently, the owner decided to enlist a Property Manager. It was then the investor was made aware of the deductions they could claim for the depreciation of the building structure and the plant and equipment items contained in the property.

On recommendation from their Property Manager, the investor contacted BMT Tax Depreciation to find out how much they could claim and to arrange a tax depreciation schedule.

Depending on the dates that the investor lodged their prior tax returns with the ATO, it is likely that they can request an amendment of their income tax assessment for the 2012-2013 and 2013-2014 financial years. At the time of contacting BMT, the property owner had missed claims for substantial deductions during the first three years of ownership. The investor may be unable to claim depreciation deductions for the 2011- 2012 financial year. The deductions missed during this period total $14,819, which would have represented a $5,483 reduction to the investor’s income tax payable for the 2011-2012 financial year. By lodging a request for the two previous income tax returns to be adjusted, this investor could claim $13,202 and $13,084 in depreciation deductions respectively (assuming they select the diminishing value method). This could represent a cash benefit of $4,885 and $4,841 for each respective financial year.

When advising an investor regarding claiming back deductions, a property professional should advise the following:

  • A separate application for each financial year requiring amendment will need to be submitted
  • Income, depreciation and other claims made will impact the outcome of each tax return
  • Depreciation allows the owner to reduce their tax payable and therefore the costs of holding an investment property
  • In special circumstances (for example, the investor may have been living overseas) the ATO may allow investors to go back further and amend additional year’s claims
  • If an investor has not maximised their claim in previous years, a depreciation schedule can be tailored accordingly. For example, low-value pooling of assets can be delayed when applying the diminishing value method
  • A Quantity Surveyor and an Accountant should both be consulted to ensure the maximum depreciation deductions are claimed.

Bradley Beer (B. Con. Mgt, AAIQS, MRICS) is the Chief Executive Officer of BMT Tax Depreciation. Bradley is a regular keynote speaker and presenter covering depreciation services on television, radio, at conferences and exhibitions Australia-wide. Property professionals who would like more information if their clients have not been taking advantage of property depreciation can contact the expert staff at BMT Tax Depreciation for obligation free advice on 1300 728 726 or visit www.bmtqs.com.au.

 

 

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