FAQs About Depreciation

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Depreciation
AS WE APPROACH the end of the financial year, many Commercial property owners often seem rather confused as to all the Depreciation deductions they might be entitled to.

To help you, here are the most commonly asked questions — purely to highlight just how depreciation can significantly bolster the overall cash return you can extract from your Commercial property.

1. What actually is Depreciation?

As your building gets older and items within it wear out, they depreciate in value. The Australian Taxation Office (ATO) allows you, as a property investor, to claim a deduction relating to the building and fixtures it contains.

Depreciation can be claimed by any owner of an income producing property. This deduction essentially helps to reduce your taxable income.

2. If a Commercial property was Built before 1982 is it too old?

No, investment properties don’t have to be new. Both new and old commercial properties will attract some depreciation deductions. But it is a common myth that older Commercial properties will attract NO claims.

Your previous years’ tax returns can also be adjusted. If property owners have not maximised their depreciation deductions, the ATO allows adjustments to tax returns up to two financial years old.

3. How is a Building’s Age Calculated?

The age of the building can be determined by obtaining council documents with dates pertaining to the original application approval date; or the occupancy certificate date and final inspection date.

Your Quantity Surveyor will conduct the relevant searches to accurately determine the age of a building. This includes historical council searches regarding lodged development applications, as well as occupancy certificates and the certified final inspection.

4. Can you claim Renovations completed by the Previous Owner?

Yes. Anything in the property that is part of a previous renovation will be estimated by your Quantity Surveyor, and deductions calculated accordingly.

This will include items which may not be so obvious. For example: new plumbing, water-proofing and updated electrical wiring.

And for capital improvements to qualify for the Division 43 building write-off, construction must have commenced within specific qualifying dates. 


5. Who estimates Construction Costs for Depreciation purposes? 


Quantity Surveyors are qualified under the tax legislation TR 97/25 to estimate construction costs for depreciation purposes and are one of a few select 
professionals who specialize in providing depreciation reports. 


Following a thorough inspection, a depreciation expert can quickly prepare a comprehensive Depreciation Schedule, which will help you maximise any available claims you can make as part of your tax return.

Bottom Line: Hopefully, that has helped to shed some light upon what your rightful entitlements are … and just how they are arrived it.

But as 30 June approaches, you really need to have someone take a look at your entire portfolio — to ensure that you “leave nothing on the table”, when lodging your tax return.

Beer

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