A Tax Depreciation Schedule will save you money!
In fact, we guarantee to do this within the first full 12 months of our report.
We do this by assessing all the items at the investment property some of which are shown above.
If our return is not greater than our fee, we will refund your money, simple as that!
Once your Tax Depreciation Schedule is completed there is no more to pay. Ever.
Furthermore, if something on the property changes throughout your ownership,
We will update your report free of charge.
By engaging us we will follow the Real Property Matters 5 Steps to ensure we achieve the best possible returns not just for the initial years but for your entire ownership of the investment property.
In fact, we believe that we are that good at our profession and confident that our service will save you in your tax that should you not save money in the first full financial year of your report, we will refund our fee… It’s our Real Guarantee… Simple as that.
+ how it works
To understand Tax Depreciation in relation to your investment property, think about our apple.
In Year 1 the apple is valued at $100 and in Year 2 the apple’s value has dropped to $50.00.
That $50.00 loss in value is depreciation.
Your building and fit-out is also gradually losing value. The ATO allows you to claim this loss of value against your taxable income… reducing the amount of tax you pay.
Tax Depreciation is an allowable ATO ‘wear and tear’ deduction you can claim on an item belonging to your investment property. As something gets older it loses value. Depreciation recoups that loss of value as a deduction against your taxable income.
Claiming depreciation is a significant taxation benefit that will reduce the amount of tax you pay.
Depreciation is a non-cash deduction; something you do not need to spend money on to claim.
There are hundreds of items that get assessed by Real Property Matters’ Quantity Surveyors and valued accordingly. Once valued, these items are given ‘effective life’ by the ATO and a depreciation amount is established.
eg Item: Carpet Value: $2400 Effective Life: 12 years Yearly depreciation claim: $200.00
Real Property Matters Quantity Surveyor’s are in constant communication with the ATO ensuring your items are depreciating per correct guide lines.
+ what can be claimed
Every property has something to depreciate!
A Real Property Matters Quantity Surveyor will inspect the property to identify and assess all possible items that can be included in the Tax Depreciation Schedule. By inspecting the property we will ensure that all Items are assessed, valued and depreciated correctly as per the A.T.O Guidelines. The areas that the Quantity Surveyor is assessing are the following.The Building
(Post July 1985) Current tax legislation states that residential properties built after July 18 1985 qualify to have the building component (walls, roof, floors etc) valued and the original construction cost can be depreciated, per ATO guidelines.
(Post 27th February 1992) Fixtures and improvements that have been completed to the property post this date also qualify to be valued and depreciated. It includes fixed assets like; pergola• fencing • swimming pool • paving • shed • clothesline • tank •letterbox.
Plant & Equipment
All plant & equipment items, irrelevant of age, qualify for Depreciation. It includes removable assets such as; range hood• oven • cook top • hot water system • smoke detectors •air conditioner • security system • floor coverings and window treatments, to name a few.
Refer to the chart below for the specific dates that various properties types must have been constructed after, to qualify for depreciation.
Every property has something to depreciate regardless of age, It would be rare for an investment property not to have improvements that could be included in your Tax Depreciation Schedule. Real Property Matters will even identify improvements that where completed by a previous owner for you to claim.
Remember, all Plant and Equipment items can be included in the report, irrelevant of their age.
If you have an older property you should read this;
Real Property Matters Why No Property is to Old for Depreciation
+ how it is calculated
A Real Property Matters Quantity Surveyor is recognised by the ATO to prepare your Tax Depreciation Schedule. The above scenario illustrates the claimable period for a property purchased in 2014 that has had improvements completed in 2000, 2005 and 2010. The depreciation on those improvements will expire 40 years after their construction date. The plant and equipment items will start depreciating from March 2014 for the new owner.
A Real Property Matters Tax Depreciation Schedule is split into two main areas;
1. Capital Works Allowance (Division 40)
2. Plant and Equipment Allowance (Division 43)
(refer to graph below)
Let’s look at Capital Works. These items are the permanent fixtures to the property. (They cannot be removed without causing damage)
Capital works is then split up into two different areas.
1. Building Works.
2. Structural Improvements.
1. Building works, as the names suggests, covers the building itself, walls, roof and floors. For the building to qualify for depreciation the construction must be built after 18th July 1985 for residential properties.
To establish a claim for Building Works, the original cost to construct the property needs to be established. Here, it’s essential that Property Investors engage a specialist Quantity Surveyor to determine the original construction cost.
The depreciation of the Building Works commences from the date when construction was completed. For residential properties the building will depreciate at a rate of 2.5%per year for a 40 year period.
Structural Improvements the other section of Capital Works, this area covers items that belong to the property that cannot be removed without causing damage. This includes items such as fencing / clothes lines / paving / to name a few, various improvements like painting / bathroom and kitchen upgrades can also be included.
For a structural improvement to be included in our depreciation report, it needs to be completed after the 27th February 1992. Like the Building Works Section, if the cost of the improvement is unknown, the assistance of a Quantity Surveyor is mandatory to establish the construction cost of the improvement.
Both areas of Capital Works (Building Works and Structural Improvements) for residential properties depreciate at 2.5% for a 40 Year period. The depreciation on the item will commence from when the construction was completed.
Plant & Equipment the other major section to property depreciation. These are the items that can be removed from the property without causing it damage, such as carpets / window treatments / air conditioners / ceiling fans / smoke detectors and cook tops, to name a few.
The depreciation life of Plant & Equipment is handled differently than the Capital Works Section.
With Plant & Equipment items, the depreciation life starts again when the Property Investor purchases the property.
Like Capital Works, our Quantity Surveyors are qualified to value these items. Unlike Capital Works the depreciation life of the Plant & Equipment items vary. Generally they range between 4 and 20 years. Remember, Real Property Matters is in constant communication with the ATO to ensure that these items are depreciating in line with their tax rulings.
+ real choices
Real Property Matters specialty is valuing and depreciating investment properties, our aim is to maximise your return. Once the value of the item and its depreciation life is established, the ATO allow the property investor to depreciate these items using different methods to fit their investment strategy;
Real Property Matters provides all three options with graphs to assist your decision;
1. Prime Cost
2. Diminishing Value
3. Diminishing Value with Low Value Pooling
Prime Cost Method
This method suits investors looking to hold the property in a long term investment plan as it provides consistent claims from year to year. It is structured so the claims are lower in the earlier years compared to other methods, yet you will still claim the full value over time.
Diminishing Value Method
This method suits investors with a short term investment plan, typically around 5 years or less. The claims will diminish each year, with a larger claim being portioned in the earlier years. The full value is still claimed over time however, it will put more money in your pocket sooner.
Diminishing Value with Low Value Pooling
In addition to the Diminishing Value Method, a Low Value Pool can be created to claim even more money sooner for those with a short term investment plan. There are two types of assets that can be allocated into a Low Value Pool to increase the property investors return, namely a Low-Cost Asset and a Low-Value Asset.
Low-cost assets are items (chattels) that have an opening value of $1,000 or less at the commencement of the Tax Depreciation Schedule. This includes items that are purchased and installed in subsequent years. In the first year, the item will depreciate at a rate of 18.75% and ever year thereafter, it will depreciate at a rate of 37.5%.
Low-value assets are items (chattels) that you claim with an opening value of greater than $1,000 and in subsequent years have depreciated to reduce their value below 148,000. When the opening value for the financial year is below $1,000 the item will be allocated to the Low Value Pool and depreciate at a rate of 37.5%.
For example, carpet valued at $1,200 would have depreciated by $240 after the first year. The remaining value at the beginning of the following financial year would have reduced to less than $1000, making it eligible to be allocated to the Low Value Pool.
Our table below will help demonstrate the three different depreciation methods available to Property Investors, notice the variance between the three methods for carpet valued at$1200:
Year Year Diminishing Value Diminishing Value
with Low Value Pool
Year 1 $120 $240 $240 Year 2 $120 $192 $360 Year 3 $120 $154 $225 Year 4 $120 $123 $141 Year 5 $120 $98 $88 Total over first 5 years $600 $807 $1054
+ the difference a claim make
Quantity Surveyors are one of the few industry professionals recognised by the ATO as having the necessary experience and expertise to prepare a Tax Depreciation Schedule. Regardless of the age of your property, Real Property Matters will identify all possible assets at your investment property in order to maximise your available deductions.
A Real Property Matters Tax Depreciation Schedule not only reduces your taxable income for the life of your property, you can also claim the schedule fee as an immediate tax deduction. Claims after 12 months range from $2,500 to $20,000 and occasionally more, our average claim is $5,520 which equates to $55,000 over 10 years. To determine your potential claim please Contact Us
The table above shows the difference that an average Tax Depreciation claim can make for you, in just 12 months. While this scenario gives you a saving of\ 87 after one year of having the schedule completed, it is only a guide. You should always check your financial situation with your Accountant or Financial Advisor.