With the End of the Financial Year (EOFY) just weeks away, it is time for property investors to ensure they obtain the optimum professional advice to secure maximum depreciation benefits.

Depreciation is one of the best tax breaks available to property investors, but a depreciation schedule is required in order to claim it.  The Australian Taxation Office (ATO) legislation states that only the owners of income producing properties are entitled to claim depreciation. Home owners also may be entitled to claim a percentage of depreciation for a part of a household being rented out. Examples include separately rented granny flat, a room let out for student accommodation, or a section of the household such as the downstairs area let out for additional income while the owners still live upstairs.

Expenses for which you CAN claim a tax deduction immediately:
•    Interest paid as part of the loan repayment;
•    Cost of advertising for tenants;
•    Lease document expenses (e.g. preparation, registration and stamp duty) and legal expenses (excluding acquisition costs and borrowing costs);
•    Repairs and maintenance and travel expenses (to collect rent, to inspect property or to maintain property);
•    Body corporate fees and charges (for administration and maintenance but not for capital expenditure);
•    Council rates, insurance (buildings, contents, public liability), water charges;
•    Borrowing expenses of $100 or less (over time if more than $100); and
•    Depreciating assets costing $300 or less (over time if costs more than $300).

Expenses for which you CAN claim a tax deduction over time:
•    Borrowing expenses (e.g. loan establishment fees, title search fees, mortgage broker fees, stamp duty charged on mortgages) of more than $100 is spread over the lesser of 5 years or the term of the loan;
•    Amounts for the decline in the value of depreciating assets over their effective life (if costs more than $300); and
•    Capital works deductions whereby the cost of investment properties can basically be depreciated over either 25 years (4%) or 40 years (2.5%).

Expenses for which you CANNOT claim a tax deduction:
•    Acquisition and disposal costs of the property (because they are capital in nature);
•    Expenses not incurred by you (e.g. water or electricity charges the tenants have paid); and
•    Expenses not related to the rental of a property (e.g. private expenses incurred by you when you use your holiday home during the time it is not rented out).

To arrange advice on tax depreciation for your investment property contact Lloyd Carey of Lloyd Carey Consultants on
0417 763 328 or lloyd@lloydcarey.com

In other news, first home buyers have been looked after in Queensland’s 2016-17 Budget announced this week.

The Queensland Government’s First Home Owners’ Grant would increase from $15,000 to $20,000 for newly constructed homes valued at less than $750,000.  The $5,000 increase in grant will apply from 1 July 2016 for 12 months. “This is a great time to build in Queensland with affordable housing on offer and the Palaszczuk Government’s First Home Owners Grant will make it even easier to enter the property market,” the treasurer said.

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