Capital Allowance for Investment Properties
A capital allowance is a tax schedule that helps you with your investment claim. Investing in property is a popular way to build wealth. However, being a property investor also means understanding the various tax deductions available to you.
This allowance allows you to claim the depreciation of your investment property and its assets as an expense.
What is Capital Allowance?
A capital allowance, also known as a tax depreciation, is the tax deduction that property investors can claim for the decline in value of capital assets. This allowance applies to investment properties, plant and factories and their included assets. It accounts for the aging, wear and tear of the property over time. By claiming the tax allowance, property investors can reduce their taxable income and pay less tax.
How to Claim for Capital Allowance and Depreciation
To properly claim capital allowance, it is recommended to obtain a Capital Allowance and Tax Depreciation Schedule from a qualified Quantity Surveyor
One of the providers we use is: www.BMT.com.au
These professionals specialise in accurately assessing the depreciation of your property and its assets. By obtaining a professionally prepared report, you can maximise the tax deductions available to you.
The report will provide you with the necessary information to claim the correct amounts and save tax!
How Much Can I Claim?
The deductions for capital allowance and depreciation can amount to thousands, and sometimes even tens of thousands of dollars, each year you own the property.
These deductions can be claimed for up to 40 years, making capital allowances and depreciation among the most significant tax deductions for property investors. By claiming this deduction, you can substantially reduce your tax liability.
But you must do it right to keep the ATO happy.
Can I Claim for Second-Hand Investment Properties?
If you have purchased a second-hand investment property, you can still claim capital allowance and depreciation on the constructed works, such as the original building and any structural improvements or additions made to the property over time. However, the second-hand assets acquired with the purchase do not qualify for annual depreciation claims. Instead, the cumulative depreciation over time can be deducted from any capital gain at the time of sale, reducing the capital gains tax payable.
Frequently Asked Questions
- How do I know if my property qualifies for capital allowance and depreciation?
All investment properties are eligible for capital allowance and depreciation claims, as long as they are used to generate income. It is important to consult with a professional Quantity Surveyor to accurately determine the depreciation value of your property and its assets.
- Can I claim for all types of assets in my investment property?
Yes, you can claim this initiative for a wide range of assets in your investment property. These include, but are not limited to, fixtures, fittings, appliances, carpets, blinds, and more. A Quantity Surveyor will provide a comprehensive report detailing the depreciable items.
- Can I claim capital allowance and depreciation if my property is negatively geared?
Yes, you can still claim capital allowance and depreciation even if your property is negatively geared. In fact, it can help offset the negative cash flow by reducing your taxable income and potentially increasing your tax refund.
- How often should I update my capital allowance and depreciation schedule?
. This ensures you accurately claim depreciation for your property and its assets.
- Can I claim depreciation for rental expenses?
No, capital allowance and depreciation specifically relate to the decline in value of your investment property and its assets. Rental expenses, such as property management fees, repairs, and maintenance, are separate deductions that you can claim on your tax return.
Capital allowance and depreciation are valuable deductions that property investors can claim to reduce their tax liability. By obtaining a Capital Allowance and Tax Depreciation Schedule from a qualified Quantity Surveyor, you can accurately determine the depreciation of your investment property and its assets, maximising your deductions.
Remember, capital allowance and depreciation can be claimed for up to 40 years!
This makes it one of the largest tax deductions available to property investors. Take advantage of capital allowance and depreciation, and maximise your tax savings today!
Additional Information:
It is essential to keep accurate records of your property expenses and assets to support your capital allowance and depreciation claims.
Regularly reviewing and updating your capital allowance and depreciation schedule ensures you claim the correct deductions.
Seek advice from a qualified tax professional if you have complex tax situations or if you are unsure about your eligibility for capital allowance and depreciation claims.
