Last year property investors missed out on tax entitlements worth $17.5 billion by not claiming everyday household items; four out of every five property investors lose out on an average of $5000 per year.
The ATO allows property investors to claim back on the depreciation of a building value by way of a tax deduction. They do so by either applying two methods;
The Diminishing Value (DV) method which is computed as a portion of the balance you have left to deduct and the Prime Cost (PC) method which is where deductions for each year are figured as a percent of the price.
They found the most common assets never claimed for were items like garden sheds, ceiling fans, right down to smaller expenses like shower curtains. Frequently missed were other assets like solar-powered generating systems, automatic window shutters and intercom systems.
By claiming these assets or household items, property cash flow can increase by 15% according to quantity surveyors BMT. If your property is eligible for deductions and you have never claimed depreciation, you can still be entitled to a substantial back claim.
Some other errors that property investors commonly make when claiming expenses are:
- Claiming rental deductions for properties not genuinely available for rent.
- Incorrectly claiming deductions for properties only available for rent part of the year such as a holiday home.
- Incorrectly claiming structural improvement costs as repairs when they are capital works deductions, such as re-modelling a bathroom or building a pergola.
- Overstating deduction claims for the interest on loans taken out to purchase, renovate or maintain a rental property.
If you have any queries on rental properties tax, or want to more about depreciation of rental properties – please don’t hesitate to get in touch with us here at Fortis Accounting Partners. You can reach us on 02 9267 0108, or via info@exemplary-financial.flywheelsites.com.
