A timely reminder from Brad Beer that the end of the financial year is fast approaching. For property investors, it’s important to make sure you have all of the paperwork in order ready to visit your Accountant to complete your annual income tax assessment. One part of the process which is often overlooked is to ensure you obtain a comprehensive tax depreciation schedule from a specialist Quantity Surveyor. So consider yourself reminded.
Transcript:
Kevin:  The end of the financial year is fast approaching. For property investors, it’s important to make sure that all of your paperwork is in order, ready for when you visit the accountant to complete your annual income tax assessment.
Now one part of the process that is quite often overlooked is to ensure that you obtain a comprehensive tax depreciation schedule from a specialist quantities surveyor. We’ll touch on that in just a moment.
Brad Beer from BMT Tax Depreciation joins me.
Brad, I thought it might be timely for us just to go over some of the benefits of doing that, and doing it right now, getting that depreciation schedule in place. Welcome to the show.
Brad:  It’s great to be here, Kevin. Yes, for sure. The big thing is that depreciation is one of those tax deductions that’s there that so many people tend to overlook. Now is a good time to think about that because it’s tax time.
You’re about to run to the end of June and we get a situation where we get group certificates, we start thinking about tax returns, of getting some cash back from the tax office. So, if you can get as much of that organized and ready to get as much as possible by the time you get to your accountant makes the whole process quicker, easier.
And this depreciation – the tax deduction for all property investors – is just not done properly so often. You don’t want to leave your cash on the table. The building is getting older, it’s wearing out, there’s deductions there. You want to make sure you’re taking advantage of those and getting the most out of those investment properties.
Kevin:  Have you had any idea of how many investors in Australia don’t get depreciation schedules who would be able to?
Brad:  The data is not available exactly on how many do and don’t get one, but the research that we’ve done would suggest that 70% to 80% of the people don’t actually maximize their deduction properly.
So you might be claiming some deductions or depreciation, which is some of the data we can see, from tax office producers, but a lot of the time they’re just not claiming as much as they can. And that could be because they guessed, they didn’t realize the old property might have some depreciation still, they use something provided by the builder, or something like that.
Now, it’s best to actually get it done properly because you don’t want to be one of those people who are getting $5000 instead of $10,000. We want to make sure we are maximizing it properly.
Kevin:  Yes. Of course, a lot of people think depreciation is only applicable to new builds. I know we’ve discussed this in the past, but it’s well worth asking an expert about an older property, isn’t it?
Brad:  I think regardless of the age, we should always ask the question. The simple thing is that old property definitely gets less deductions but it doesn’t necessarily get no deductions. It’s such a myth out there that an old property’s not worth it.
You really should ask someone who knows about depreciation. If I tell you it’s not worth it for the old property, you probably should listen. But if someone who doesn’t do this all day everyday thinks that maybe because it’s old, it may not get enough, let’s assess and see if there’s some money there before you make that decision.
Kevin:  Of course, there were some changes recently in the Budget, weren’t there? Bring us up to date on that, Brad.
Brad:  The Budget has actually made some changes to the plant and equipment that’s claimed. Some of the claims relate to the structure of the building, some relate to the plant and equipment, carpets, blinds, air conditioners, and those sorts of things. They’ve made some changes from Budget night for everyone that buys from Budget night where in second-hand property you won’t be able claim some of those things. And it will affect those old properties.
It doesn’t mean there’s nothing in any of them. It’s still almost the same question: ask a quantity surveyor that knows about depreciation before you decide, because we’ll be able to tell you whether it’s worth it or not.
Now, under those changes, there will be more properties than there used to be that won’t be worth it. But you still should ask the question because you still don’t know the intricacies of the things that we can find in a place for depreciation. There’s just going to be a few more of you in the future where we’re going to say “Look, no, it’s not worth it.”
One really important thing to consider about those Budget changes is that, unless you exchanged your contract after Budget night, there’s no change to you. It’s only someone who’s bought since then, and it looks like it’s only someone who has bought a second-hand property since then.
So, everyone should ask the question, but most of the people doing a tax return now, we’re coming up to the 30th of June, if you exchanged on Budget night in May, you probably haven’t settled it yet and you’re only just going to settle before the financial year, so you probably weren’t going to be the person thinking about it anyway.
So, if you’re an investor getting to the end of the financial year now, forget about the budget changes; it’s only for your future investing. You still need that deduction because the thing is grandfathered, and there’s no change to people who’ve bought in the past.
Kevin:  You can’t beat that professional advice. Can I ask you about back claims? Tell us about that.
Brad:  A very important thing to consider is back claims. For all those people who aren’t doing it properly, you can easily go back and amend up to two years of your tax returns and actually go back and get some money from the tax office.
A bit like if you don’t pay your tax, the Tax Office will find you and make you pay it, it kind of works the other way. Didn’t claim all my depreciation for the last two years? It doesn’t matter how long you’ve owned the property, you can amend up to two years easily. If you’ve owned it four years, two years. So, don’t do another tax return and not be able to go back another year; get the two years fixed up before you do the next one.
Back claims are very important because they mean cash, firstly, and so many people are leaving it on the table. But as we get to tax time, if you do another tax return, you’re cutting another year off your potential back claims.
Kevin:  Great advice. And as you said right up front too, do not leave any money on the table. If it’s there for you, make sure you chase it.
Brad:  To me, not doing a depreciation schedule is like offering the bank more interest or reducing their rent because you’re a nice guy.
Kevin:  Brad, just before I let you go, mate. Are there any benefits in arranging the schedule prior to June 30?
Brad:  The main benefit pre-June 30 is that if you’re going to get a quantity surveyor to do a depreciation schedule, if you order and pay for it before June 30, that fee is deductible in this year.
You’re going to need this when you do you tax return in July or August anyway, so you might as well buy it in June because then you get a deduction for that fee in this year instead of next year.
On top of that, when you get to your accountant, it is ready, they don’t have to send you out for more things, so you’ll get that tax return back quicker.
Kevin:  You have time to do it. Get your skates on. Make sure it happens. BMT Tax Depreciation are the people to talk to.
Brad Beer, thank you very much for your time.
Brad:  Kevin, great to be here, thank you.