Tax time can be confusing for many property investors, but getting sorted is simply a matter of following some basic rules and getting the right advice. In today’s show I talk to Brad Beer, from BMT Tax Depreciation, about that and he gives us 7 simple rules.
Kevin: We’re always looking for ways to get the most out of our investment property. I’m going to talk now to Brad Beer from BMT Tax Depreciation. That’s always a great way to do it as we head toward Christmas, Brad, isn’t it?
Brad: Absolutely. We all need more money at Christmas, so yes.
Kevin: What are some of the ways that we actually get more money out?
Brad: I still see people all the time people who haven’t really got depreciation sorted out properly. There are a lot of things that you can claim on an investment properly, and most of them you have a receipt for. You pay your interest, you get information from the bank about the interest you’ve paid, etc. Depreciation is one that often gets missed, because you don’t see depreciation happening and you don’t get a bill for it.
Kevin: I think one of the common mistakes I see, too, is that a lot of investors think that you can only get depreciation on a new property, but we know that’s not right.
Brad: Absolutely. A new property gets the most, and near new gets a lot, but the thing I like to say is you’re never too old. An old property still gets depreciation. It doesn’t get as much because the age does impact on some things, but it’s always worth asking the question to see if on your particular property there may be any deductions there for you.
Kevin: With the advent of the Internet and a lot more people working from home, does that offer up other opportunities to claim depreciation from a home office, as well?
Brad: Depreciation is claimable on any investment property, so any property that you rent out to tenants is an investment property, obviously. But when you operate a business from home, or even rent part of your home out, then part of your home is potentially becoming an investment property for the use of business. Therefore, a percentage of the depreciation that you would claim might be claimable in that situation.
It’s good to work out with your accountant the other expenses that may be able to be claimed then, but depreciation is also one of those that you can quite often get some claims from if you’re using it for that purpose.
Kevin: Another thing I wonder, too, is that quite often we buy properties in different times of the year. Do we have to wait for a full year to claim depreciation?
Brad: No. Settling some time in the middle of June and you may only have a couple of weeks of time that’s available to rent but, even if it hasn’t actually been rented, as long as it’s for the purposes of rental and available to rent, that depreciation still applies.
The rules mean that some of these things are actually quite high claims in the first year, because it’s the same whether you’ve owned it for a couple of weeks or the whole year. It’s always good to make sure if you are settling just before the end of the financial year, your partial year is there.
The other thing is if you do live in the property and then decide to move out of it for a period of time, you don’t always move on the 30th of June, do you? So there should be some depreciation available on that partial year that it’s rented out – absolutely.
Kevin: Something you touched on earlier in our chat was making sure you get some good professional advice. I have seen where classifying a plant or equipment asset incorrectly can actually negatively impact your deductions.
Brad: Absolutely. The correct advice is to have your accountant work out the whole of your claims in relation to your investment property. We specialists work in depreciation only and really identifying those items and costing them up properly so we’re not in trouble with the ATO, and also making sure we identify those items so you get to claim them quicker. We know what the items are. We know how to cost them properly for the purposes of depreciation, so you get the most deductions out of that property.
Kevin: Are all quantity surveyors the same?
Brad: A traditional quantity surveyor measures and estimates construction costs of buildings. Effectively, we’re brick counters. We count bricks and tell you how much they should cost. Depreciation is a specialist part of quantity surveying. You need to be the quantity surveyor to estimate the construction costs, but then you need a separate set of tax-related depreciation-related skills to make sure you’re getting the most out of those properties.
We all know how to estimate construction costs, but [4:22 inaudible] especially to work with the accountant properly and value things up for the purposes of getting all the deductions out of the properties.
Kevin: It’s always good talking to you Brad Beer. Brad, of course, from BMT Tax Depreciation, one of our supporters. You can get all the links you need to contact those guys through our website, RealEstateTalk.com.au.
Brad, thanks for your time.
Brad: Thanks, Kevin. Great to chat, as always.