Frequently Asked Questions?
If my property was built before 1985, is it too old?
No. It is worth noting that:
-
Your investment property does not have to be new: Both new and old properties will attract some depreciation deductions. A common myth is that older properties will attract no claim.
-
You can adjust previous year’s tax returns: When a property owner has not been claiming or maximising tax depreciation deductions, the previous two financial year’s tax returns can generally be adjusted and amended.
Why is plant and equipment itemised?
The ATO specifies an individual effective life for each plant and equipment item. Consequently, our reports show the estimated cost for each item and its contribution to the depreciation total per financial year. The original building structure and capital improvements, or Division 43, are all written off at the same rate (unless building works have been completed over different legislation periods). Therefore individual costs for these items aren’t expressed in the report. If required by the ATO, the estimates for Division 43 can be justified.
Why does the depreciation and capital allowance schedule only last 40 years?
From the date of construction completion, the ATO has determined that any building eligible to claim the building write-off allowance has a maximum effective life of 40 years. Therefore, investors can generally claim up to 40 years depreciation on a brand new building, whereas the balance of the 40 year period from construction completion is claimable on an older property.
Can I claim renovations completed by the previous owner?
Yes. Anything in the property that is part of a previous renovation will be estimated by our quantity surveyors and deductions calculated accordingly. This includes items that are not obvious e.g. new plumbing, water proofing, electrical wiring etc. For capital improvements to qualify for the Division 43 building write-off allowance, they must have commenced construction within the appropriate Division 43 time periods.
What information do I need to provide?
Information required to produce a Tax Depreciation and Capital Allowance report includes the following:
-
Date of settlement
-
Purchase price
-
Access details for inspection (E.g. property manager or tenant details)
-
Any information pertaining to improvements or additions made to the property including dates and actual costs (where available)
-
The date the property became available for income producing purposes.
Who is qualified to estimate construction costs for depreciation purposes?
Quantity Surveyors are one of the few professionals recognised by the ATO to have the appropriate construction costing skills to calculate the construction cost for the purposes of building depreciation. BMT also prepare cost plan estimates for all types of buildings. Construction costs are estimated in today’s market and historically adjusted to the year of construction using cost indices.
How do you work out how old the building is?
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. Similar methods are used Australia wide, however some properties are privately certified. BMT conduct the relevant searches required to accurately determine the age of a building. These include historical council searches regarding lodged development applications, as well as Occupancy Certificates and certified final inspections.
Need to know anything else? Call Laura or Kayla to find out more.