A Property Manager’s guide to depreciation

Educating your clients on the benefits of depreciation gives you a point of difference in today’s competitive property management industry. By learning about depreciation and how investors claim it, you can help your clients reduce their taxable income and therefore improve their available cash flow.  

To help explain property depreciation, below are some key facts to help guide your clients on their investment journey and ensure they achieve the best possible results from a property.

What is property tax depreciation?

As an investment property gets older, the building’s structure and the assets within it wear out – they depreciate. The Australian Taxation Office (ATO) allows owners of income-producing properties to claim this depreciation as a tax deduction. Owners of income-producing property may be eligible for thousands of dollars in depreciation deductions. Claiming depreciation means an investor pays less tax.

Who can claim depreciation?

All types of income-producing properties have substantial taxation benefits. The owners of both new and older investment properties can claim depreciation benefits which help to reduce their tax liability.

A common myth is that older properties will attract no claim, however, this is not the case. It’s worth making an enquiry about any property, regardless of its age.

What is a tax depreciation schedule?

A tax depreciation schedule is the best way to ensure your clients claim maximum depreciation deductions. A BMT Tax Depreciation Schedule covers all deductions available over the lifetime of a property, including capital works and plant and equipment assets. The schedule provides a summary of both methods of depreciation and is 100 per cent tax-deductible. During the FY 2018/19, BMT found residential property investors an average first-year deduction of almost $9,000.

What depreciation legislation is important to know?

Legislation passed in November 2017 brought about major changes to residential plant and equipment depreciation claims. Under current legislation, owners of second-hand residential properties who exchanged contracts after 7:30pm on 9th May 2017 cannot claim deductions for previously used plant or equipment assets. They can still claim brand-new plant and equipment depreciation on assets they purchase and install in the property once it is income-producing.

What are three ways to recommend depreciation to clients?

  1. Depreciation is considered a non-cash deduction. Unlike other deductions like interest or property management fees, an investor doesn’t need to spend any money in order to claim it.
  2. A tax depreciation schedule can save investors thousands of dollars each financial year. During FY 2018/19, BMT Tax Depreciation found residential clients an average first-year claim of almost $9,000.
  3. In most cases, investors only need to get one depreciation schedule. A BMT Tax Depreciation Schedule lasts for up to forty years and has a one-off, 100 per cent tax-deductible fee.

For more information about depreciation, visit the real estate professionals page on our website or speak to one of our expert staff on 1300 728 726 today.

Article provided by BMT Tax Depreciation.
Bradley Beer (B. Con. Mgt, AAIQS, MRICS, AVAA) is the Chief Executive Officer of BMT Tax Depreciation. 
Please contact 1300 728 726 or visit 
bmtqs.com.au for an Australia-wide service.