Kerry Packer famously said ‘I am minimizing my tax and if anybody in this country doesn’t minimize their tax they want their heads read because as a government I can tell you you’re not spending it that well that we should be donating extra’.
Probably the easiest (and often neglected) way to minimise your tax is through a tax depreciation schedule, where it’s not uncommon for us to see an investor better off by at least $20k over the life of their investment loan.
June is the perfect month to start thinking about tax minimisation (before July 1) and a tax depreciation schedule is a ‘no brainer’.
Many people are under the misconception that depreciation is only claimable on new properties and this is simply not true.
We find there are only a few instants where it is not worth getting a depreciation schedule done, but in 95% of cases, we think it’s a valuable option to get a Depreciation Report completed. If you’re not sure, you can discuss your concerns directly with Australian Valuers by calling us on 1800 664 094, or email at admin@australianvaluers.com.au.
We also offer a minimum claim guarantee to ensure that the report is worth your while. IF YOU DON’T GET BACK DOUBLE YOUR FEE IN YEAR 1 – YOU GET A FULL REFUND
As a property investor, you want to maximize your return, improve your cash flow and minimise your tax.
By having Australian Valuers complete a Depreciation Schedule for you, we know we can reduce your taxable income.
By reducing your taxable income, we can help you create a greater return on your investment.
How does a Depreciation Schedule improve your tax/cash flow?
1. Rules for capital costs
Capital costs or construction costs is the cost to build, extend or renovate a building. This doesn’t include the cost of the land or soft landscaping.
Rates of depreciation are determined by:
- Type of construction
- The year the construction was made
Put simply, any construction that was built after 18th July 1985 can be depreciated at 2.5% (or in some cases – 4% if the construction was carried out in a certain time frame).
2. Rules for Plant and Equipment
This include items like:
- Stove
- Curtains
- Carpets or floors
The effective life of any depreciable asset is the length of time (in years) the asset can be used to help you produce an income.
3. Case Study
See below the impact a tax depreciation schedule can have.
Person with Tax Depreciation Schedule Vs Person without
| Did Claim Depreciation | Didn’t Claim Depreciation | |
| Income | ||
| Wage Income | $70,000 | $70,000 |
| Tax Paid | $14,297 | $14,297 |
| Rental Income | $30,000 | $30,000 |
| TOTAL INCOME | $100,000 | $100,000 |
| Tax Deductions | ||
| Interest | $22,000 | $22,000 |
| Repairs | $1,000 | $1,000 |
| Rates | $2,000 | $2,000 |
| Insurance | $1,000 | $1,000 |
| Depreciation | $11,000 | |
| TOTAL DEDUCTIONS | $37,000 | $26,000 |
| Taxable Income | $63,000 | $74,000 |
| Tax on Taxable Income | $12,022 | $15,597 |
| REFUND | Refund of $2,269 | Owes an additional $1,300 in tax |
Result
In the above example, the person that did a tax depreciation schedule, benefitted by $3,569 in the pocket.
Imagine the effect of this over 10 years?
The easiest way to help you understand this is:
- REPAIRS – are immediate tax deduction
- IMPROVEMENTS – are depreciable over time
Info Video on Claiming Depreciation and Building Deductions
If you want further information about this (including costings etc.), call Australian Valuers on 1800 664 094, email at admin@australianvaluers.com.au or submit the form below.
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