For more information on how property depreciation can reduce your tax, please call 044 909 3803
What is tax depreciation?
Tax depreciation also known as property depreciation is a legitimate deduction against assessable taxable income, generated by a residential or commercial investment property.
It works by allowing property investors to deduct a portion of the original costs of plant and equipment such as furniture and fittings and capital works such as renovations on their investment property each financial year, over the effective life of that item.
The Australian Taxation Office recognises that the value of capital assets gradually reduces over time as they approach the end of their effective life. These assets can be written off as a tax deduction – known as depreciation.
What depreciation am I entitled?
If you own an investment property (new or old, large or small), two areas of depreciation are available:
1. Plant and Equipment; and
2. Capital Works on the Building.
Different items within a rental property have different rates of depreciation based on the effective life of the item.
Quantity Surveyors, have the expertise and knowledge to know which items are depreciable and how savings can be made.
To claim maximum tax benefits on an investment property the Australian Taxation Office (ATO) requires property investors to complete a fully compliant tax depreciation report.
As a registered Tax Agent, Tax Allowance Services is qualified to produce ATO-compliant reports.
What is a property depreciation report?
A property depreciation report (depreciation schedule) sets out all tax depreciation and building write-off claims for a new or existing investment property.
A Tax Allowance property depreciation tax report provides a 40-year schedule for capital works allowance (building write-off) and depreciable assets (plant and equipment allowance) on an investment property, ensuring owners receive the maximum tax entitlements.
Based on your allowances, the report calculates the amount you can deduct each year as part of your tax return.
What can tax depreciation do for investors?
Claiming tax depreciation allowances on an investment property increases its value by giving investors greater return on their investment.
Depreciation allowances combined with additional negative gearing factors such as interest on a mortgage, repairs and maintenance can help investors reduce their taxable income, pay less tax and improve cash flow.
The savings made can then be redirected to other areas, such as an investment mortgage or other debt reduction.
Tax Allowance Services can help all owners achieve maximum tax benefits from their investment property, no matter the size or age.
For more information on how property depreciation can reduce your tax, please call 044 909 3803.
Q. My property is built prior to 1985, is it still worth doing?
Yes. Even if your property was built prior to the qualifying date for capital works deductions (i.e. 17 July 1985 for residential, properties) you will mostly likely be entitled to some deductions. These could include the cost of improvements prior to your purchase for example, concreting, painting, renovations, and the value of the plant and equipment items within the property, such as blinds, carpets, stove tops, hot water systems etc.
Q. Do I have to do this report every year?
No. The tax depreciation report is valid for the lifetime of the investment. However, it is recommended you update your schedule if capital works are undertaken on the property or assets in the house are replaced.
Q. How far back can the report go?
The report will always begin from Settlement Date.
Q. Do you cover all regional areas?
Yes. Tax Allowance Services is based in Perth but visits to country areas are undertaken.
Q. Is it worthwhile to claim depreciation on older properties?
Yes. Regardless of the age of the property, there will almost always be deductions you can claim. These may include building improvements and the value of plant and equipment associated with the property. A comprehensive property depreciation report for an older property is likely to generate significant deductions and cover the cost of the report.
Q. Do you inspect all investment properties?
Tax Allowance Services conducts physical inspections of all properties when necessary. We prefer to inspect properties to establish which items in rental properties are depreciable and how savings can be legitimately achieved by investors.
Q. What parts of my property can I claim?
If you own an investment property (new or old, large or small), two types of depreciation are available:
1. Plant and Equipment depreciation – this covers assets associated with your investment property that have a finite lifetime and fall in value over time as a result of age and wear and tear. It includes fittings such as carpets, lighting, appliances (stove, fridge), furniture, security systems, air conditioning units and even garbage bins which are provided as part of the property.
2. Capital Works depreciation – this covers aspects of the building, including construction, extensions, alterations and improvements of a structural nature. It includes work undertaken such as extensions for a garage or patio, kitchen renovations, bathroom makeovers or the addition of a gazebo, carport, fence or sealed driveway.
Different items within a rental property have different rates of depreciation based on the effective life of the item and when the asset was acquired.
Capital works depreciation is a particularly complex area and is not as easy as simply claiming a capital works deduction. Depreciation rates can vary depending on the type of building works and when construction commenced.
Given the complexity of property depreciation, ordering a property depreciation report from an expert ensures correct asset rates are used and claims aren’t made on items that can’t be depreciated.
Quantity Surveyors have the expertise and knowledge to know which items are depreciable, the rate at which they can be depreciated and how savings can be made.
As an ATO-compliant property depreciation firm Tax Allowance Services keeps up-to-date with all ATO rulings and changes.
The ATO’s full list of depreciable assets (more than 200 items) can be found at www.ato.gov.au.
Q. How do I calculate depreciation on my investment property assets?
There are two methods for calculating depreciation on plant and equipment assets associated with your investment property. Both methods are approved and accepted by the Australian Tax Office, which sets the useful lifetime of assets and prescribed depreciation rates depending on the depreciation method.
1. Prime Cost
This method assumes that the asset experiences even wear and tear over its useful life and accordingly a constant rate is applied. This rate is calculated by dividing 100% by an asset’s useful life in years. For example, the prime cost depreciation rate for an asset expected to last four years is 25%. It may also be referred to as straight line depreciation.
2. Diminishing value
This method assumes an asset wears down more in its earlier years of use and accordingly allows for higher depreciation write offs in the beginning, and less depreciation later on during the asset’s life. It is calculated by dividing 200% by an asset’s useful life in years. For example, the diminishing value depreciation rate for an asset expected to last four years is 50%.
It is important to check with the ATO about prescribed depreciation rates and the accepted useful lifetime of different assets.
An accountant or qualified professional will be able to advise on the best method for your circumstance.
Q. How do I calculate depreciation on my building’s capital works?
As a general rule, you can claim a deduction for the cost of constructing a residential rental property over 40 years from the date the construction was completed.
To calculate your claim you need:
- the date construction commenced and completed;
- details of the type of construction;
- details of who carried out the construction work;
- the construction cost ; and
- details of the period during the year that the property was used for income producing purposes.
The Australian Tax Office (ATO) sets our different rates of depreciation depending on when constructed commenced and finished, the type of construction and who undertook the construction. Full details are available on the ATO website.
To ensure you are claming your correct entitlements, order a property depreciation report from a qualified company such Tax Allowance Services. We keep abreast with the latest government rulings, rates and interpretations to ensure all your maximum entitlements are claimed.
Q. What are the ATO’s approved depreciation rates and effective lifetimes?
The ATO determines the acceptable depreciation rates and effective lifetimes for investment property plant and equipment and capital works. These rulings are regularly updated; often to coincide with the new financial year.
It is important to note that different rulings apply to residential investment properties and commercial investment properties.
The ATO publishes a list of rates and effective lifetimes on its website.
As Qualified professionals we keep up-to-date with changes to the ATO rulings, legislation and interpretations.
Tax Allowance Services
Tax Depreciation Terms and Conditions
The following terms are the standard terms and conditions that apply to Tax Depreciation Schedules (or Capital Allowance Reports) or consultancy assignments and services for which Tax Allowance Services (TAS) are engaged (the Services). These terms form part of the appointment of TAS by any entity or person who engages TAS to perform the Services (the Client) to provide the Services unless other specific terms and conditions are agreed in writing between TAS and the Client.
1. Confidentiality and Privacy
The parties acknowledge that in performing their obligations and responsibilities under these Terms and Conditions, each will have access to confidential information of the other. Each party agrees:
(a) only to use confidential information of the other party for the purposes relating to the Services;
(b) to receive and maintain all confidential information of the other party in confidence;
(c) not to use, directly or indirectly, nor disclose to any other third party any confidential information of the other party without the prior written consent of that party, except where:
(i) the information is public knowledge (but not being made so because of a breach of these Terms and Conditions);
(ii) the party has independently created or received the information;
(iii) disclosure is in relation to the provision of the Services or the betterment of the Service offering by TAS; or
(iv) disclosure is required by law or a regulatory body.
These Terms and Conditions are binding on the Client upon receipt of instructions to proceed by TAS. By instructing TAS to provide the Services, the Client irrevocably agrees to and acknowledges these Terms and Conditions.
3. Exclusion on Use
Services provided by TAS are for the Client for the specific purpose outlined in writing in the engagement. Only the Client, or any other party to whom the advice or report is specifically addressed, may rely upon the advice or report. Should any other party seek a copy of the advice or report, the consent of TAS must first be obtained in writing. TAS may withhold such consent at its sole discretion. The Client indemnifies TAS for any direct or indirect loss suffered as a result of a third party gaining access to TAS advice and/or report without TAS written consent.
4. Period of Quote
Any quotes for TAS fees are valid for a period of 30 days from the date of issue unless otherwise stipulated in the quote. TAS reserves the right to amend the quotation after this period and/or reject an offer to purchase the services at the previously quoted price if outside of this time frame.
5. Performance of the Services
TAS will endeavour to exercise all reasonable skill and care in providing the services and will inform the Client if it becomes apparent that the scope of the engagement for the Services needs to be varied. TAS will confirm with the Client any agreement reached resulting in a variation of the scope of engagement.
TAS reports are prepared in accordance with the provisions of the Income Tax Assessment Act 1997, as amended from time to time and will be subject to disclaimers and qualifications where those are referred to in the report.
6. Information Provided by the Client
The Client must provide to TAS all information and/or documents necessary or reasonably required to enable TAS to properly perform the Services. The instructions should be provided in writing and must include a statement as to the purpose for which the Client intends to use the report.
The Client accepts that TAS is entitled to rely on the accuracy, sufficiency and consistency of any and all information supplied by the Client. TAS accepts no liability for any inaccuracies contained in information disclosed by the Client, whether prepared by the Client or by a third party and whether or not supplied directly to TAS by that third party.
TAS reserves the right to retain a copy of the Client’s information for purpose of compliance with any professional, legal or regulatory requirements or obligations including those of the Australian Tax Office (subject always to TAS’s continuing duty to treat such information as confidential).
7. Information Provided by Tax Allowance Services
Intellectual Property in all material of whatever nature prepared by TAS and provided to the Client or otherwise generated in the course of carrying out the Services shall remain the valuable property of TAS. No part of any report, document or publication prepared or provided by TAS may be reproduced or transmitted or disclosed in any form or by any means, or stored in any database or retrieval system of any nature, without prior written permission of TAS.
All information and advice made available by TAS to the Client is for the sole use of the Client for the sole purpose for which it was prepared.
8. Third Party Liability
The Client acknowledges that, save in respect of TAS’s own sub-contractors, TAS does not warrant the performance, work or the products of third parties. The Client must not hold TAS responsible for the inspection or supervision of the execution of such performance, work or products.
9. Payment of Fees, Expenses and Disbursements
Payment of the fees for the Services shall be calculated, charged and made as agreed in writing between the Client and TAS. The Client will pay reasonable expenses and reimburse the disbursements incurred on its behalf by TAS as agreed in writing. All references to fees, expenses and disbursements are exclusive of any applicable government taxes unless indicated otherwise. Any such taxes chargeable on TAS’s fees expenses and disbursements will be paid by the Client.
When payment details are submitted by a Client for Services, the Client irrevocably authorises TAS to charge the Service fees. In the event a payment is not honoured for any reason, TAS may charge the Client its reasonable costs in collecting payment for the Services and withhold the advice or report until the fees are paid. If payment is not made for a period of time, TAS may charge an increased fee or amend the quotation.
Where for any reason TAS provides only part of the Services for which it is engaged, TAS is entitled to charge fees proportionate to the agreed fees, based on TAS’s estimate of the percentage of completion of the Services.
In the event that invoices are not settled on the terms agreed prior to acceptance of the engagement by TAS, TAS will be entitled to charge interest on the fees from the date of invoice and also reserves the right to withdraw responsibility for work performed.
In the event that either party is in material or persistent breach of any of the Terms and Conditions, the other party may terminate the engagement if, upon the expiration of 14 days after serving notice on the party in default, steps have not been taken by such party to remedy the breach.
On termination of the engagement, TAS will be entitled to, and must be paid, fees for all Services provided to that time in accordance with the above clause relating to payment of fees.
TAS’s total liability for any claim for loss, damage or expense incurred or suffered by the Client, whether arising under or in connection with or incidental to the Services, including the performance or non-performance of TAS’s obligations under these Terms and Conditions or anything incidental to it, and whether by way of indemnity, by statute, in tort (for negligence or otherwise) or on any other basis in law or in equity will be limited to the total fees paid by the Client for the Services provided by TAS to the Client under these Terms and Conditions preceding the date on which the loss, damage or expense arose. To the extent that any warranties are implied by law, TAS’s liability for a breach of the implied warranty will be limited to either supplying the Services again or paying costs of having the Services supplied again.
Despite any other provision in these Terms and Conditions, TAS will not be liable for any consequential or indirect loss such as loss of profits or revenue, loss of business opportunity or loss of goodwill, suffered by the Client whether arising under or in connection with or incidental to these Terms and Conditions, including the performance or non-performance of its obligations under these Terms and Conditions or anything incidental to it, and whether by way of indemnity, by statute (to the extent that it is possible to limit such liability), in tort (for negligence or otherwise), or on any other basis in law or in equity.
The Client indemnifies TAS from and against any and all loss, damage or expense directly or indirectly arising from or in connection with any breach of these Terms and Conditions by the Client or any unlawful, negligent or wilfully wrong act or omission by the Client or the Client’s personnel.
12. Dispute Resolution
A party claiming that a dispute has arisen under or in relation to these Terms and Conditions must give written notice to the other party specifying the nature of the dispute. A dispute must be referred to mediation if it cannot be resolved within 60 days of receiving notice from the other party. The mediator will be selected by agreement between the parties who will bear the costs of the mediation equally.
The Client must not assign or transfer any of its rights or obligations under these Terms and Conditions without first obtaining the written consent of TAS. In the event TAS permits an assignment or disclosure to a third party, TAS does not assume any duties to that third party and the Client indemnifies TAS for any loss that might occur as a result of the assignment or transfer.
(a) The schedules and assessments included in our Capital Allowance Report are prepared for the sole purpose of claims under the Income Tax Assessment Act 1997 and are for the use of the current owners of the property, or their taxation agent in dealings with tax claims only.
(b) If a Client has any problem as a consequence of the Depreciation Report where you believe it to be incorrect, inaccurate or for some other reason the Client must contact TAS immediately.
(c) The law governing this Agreement will be the law of the State or Territory in which the Services are performed by TAS and the parties submit to the non-exclusive jurisdiction of the courts in that State or Territory.
(d) These Terms and Conditions, along with any terms stipulated on the quotation and instruction documents as well as the report and advice, constitute the sole and entire agreement between the parties with regard to this subject matter and a warranty, representation, guarantee or other term or condition of any nature not contained or recorded in these Terms and Conditions is of no force or effect. The conditions contained within these Terms and Conditions supersede all other subsequent documents in priority.
(e) Clauses 1, 2, 6, 7 and 11 survive expiry or termination of these Terms and Conditions.
Tax Allowance Services
Our commitment to privacy
What is personal information and why do we collect it?
Personal information is information or an opinion about an identified individual, or an individual who is reasonably identifiable, whether the information or opinion is true or not, and whether the information or opinion is recorded in a material form or not. Examples of personal information we collect include: names, addresses, email addresses, phone and facsimile numbers. In some instances we also collect ownership or tenancy information of individuals or corporations as part of our day to day activities.
This personal information is obtained in many ways including interviews, correspondence, by telephone and facsimile, by email, via our website www.taxallowanceservices.com.au (the Website) and from third parties.
We collect your personal information for the primary purpose of conducting our business, which includes:
• the provision of property valuation services;
• conducting marketing campaigns;
• assisting with the administration of TAS’s operations;
• collating aggregate property valuation information;
• collecting information on people who responded to marketing campaigns;
• future planning to improve our business.
Sensitive information is defined in the Privacy Act to include information or opinion about such things as an individual’s racial or ethnic origin, political opinions, membership of a political association, religious or philosophical beliefs, membership of a trade union or other professional body, criminal record or health information.
Sensitive information will be used by us only:
• for the primary purpose for which it was obtained;
• for a secondary purpose that is directly related to the primary purpose;
• with your consent; and/or
• where required or authorised by law.
Where reasonable to do so, we will collect your personal information only from you. However, in some circumstances we may be provided with information by third parties. In such cases, we will take reasonable steps to ensure that you are made aware of the information was provided to us by a third party.
Disclosure of personal information
We use and disclose personal information for the purposes for which we collect that personal information and any directly related purpose, or if required by law. This includes disclosing personal information to service providers who assist us in our functions and activities only when reasonably necessary to assist in those functions and activities.
For the purpose of providing or offering services and benefits to our members, we may also disclose personal information to organisations such as:
• data analysis companies;
• outsourced service providers.
Security of personal information
Your personal information is stored in a manner that reasonably protects it from misuse, interference, loss and from unauthorised access, modification or disclosure.
When your personal information is no longer needed for the purpose for which it was obtained, we will take reasonable steps to destroy or permanently de-identify your personal information. However, most of the personal information we collect or store is, or will be, retained in client files which may be kept by us for a minimum of seven (7) years.
Please be aware that no security measures are perfect or impenetrable. We cannot control the actions of other website registrants with whom you share your information. We cannot guarantee that only authorised persons will access or view your personal information.
We cannot ensure that information you share on the Website or provide to us will not become publicly available. We are not responsible for third party circumvention of security measures on the Website, our electronic databases or at any of our premises.
Maintaining the quality of your personal information
We endeavour to ensure that any personal information held is accurate, complete, up-to-date, and in some cases, relevant and not misleading.
We will take reasonable steps to update any personal information that we learn is inaccurate, incomplete or no longer up-to-date. This will generally occur by you notifying us of any change in your personal information. Accordingly, it is important that you advise us at the earliest opportunity of any changes to your personal information so that our records can be updated.
Deal with us anonymously
Where it is lawful and practicable, you can deal with us anonymously or under a pseudonym (e.g. general enquiries about the services we can offer you).
You may make a complaint if you consider that the TAS has interfered with your privacy because of an alleged breach of the privacy principles under the Privacy Act. The procedure for a complaint is:
1. A written complaint must be forwarded to the Privacy Officer and must specify details of the alleged breach.
2. The Privacy Officer will consider your complaint and make a determination within 45 days. You will be advised of the determination in writing.
If the Privacy Officer determines that there has been a breach of the privacy principles, he or she will advise the relevant persons at the TAS in writing of any action required in order to remedy the breach. If the breach is not remedied within 30 days the Privacy Officer must inform the CEO of TAS.
The Privacy Officer will keep a record of all complaints and determinations together with a record of the action taken to remedy any breach.
If you have any questions or concerns about this Policy or how we manage the personal information we collect, you can contact us on:
Tax Allowance Services
Tel – 044 909 3803