Landlords potentially losing thousands through outdated depreciation schedules

Written by in Finance on April 11, 2016

Four in five landlords are losing money due to obsolete depreciation schedules. With the financial year approaching, Executive Chairman of Raine & Horne, Angus Raine, is advising Australian property investors to put an up to date and current depreciation schedule in place.

According to Mr. Raine, almost 80% of landlords do not maximise depreciation claims against their investment property and could be missing out on thousands of dollars at tax time.

“The problem is that many landlords either aren’t aware of the benefits associated with depreciation, or don’t have an up-to-date depreciation schedule, which enables them to claim against the reduction in value of items such as carpets, curtains, stove cook tops, some light fixtures, shower heads and so on,” says Mr Raine.

“Each year, landlords can claim between 10% and 40% off a variety of depreciable items, and sometimes more.”

“In many cases, 2.5% of the building cost of the investment home is also claimable on an annual basis.”

Property investors may not realise the tax benefits of depreciation schedules on new homes. Almost 100% of the construction cost is tax-deductible on new homes and at least the first 5 years of ownership on established homes.

According to Brad Beer, from quantity surveying firm, BMT Tax Depreciation Quantity Surveyors, “as a rule, the newer the property, the more an investor can claim, making purchasing a near-new house or apartment potentially more worthwhile, in a taxation sense.”

Landlords should seek professional support when creating or updating a depreciation report, according to Mr Raine.

“Moreover, the costs associated with a depreciation schedule, which can be between $650 and $700 per report, are also tax deductible,” advises Mr Raine.