What kind of properties does a depreciation schedule apply to?

On today’s show we discuss more on depreciation schedules with Brad Beer from BMT Tax Depreciation.
We find out if they apply to properties of all ages and how long they last.

Read the transcript here:

Kevin:  Brad Beer joins me once again. Brad, thanks again for your time. Last time we met, we discussed depreciation schedules. If you missed that, you can go and have a listen back to that chat where we talked about what the depreciation schedule was.
My question for you this time is how long does one of these schedules run? How long does it last?
Brad:  Thanks, Kevin, for having me back. If you buy a new property now, you get to make those claims for 40 years. Basically, the schedule will actually project it out for 40 years. You just take that back to your accountant every year. If you still have that property in 40 years, you’ll still be making deductions based on that.
Kevin:  One of the questions I’m constantly asked by investors is does it depend on the age of the property as to how powerful that depreciation schedule, or even if it applies?
Brad:  This is one of the most common questions I get, as well, Kevin. What I’d like to say is don’t worry about the age; ask the question. Older properties don’t get as much depreciation, but they definitely do get some.
We will talk to you about your properties. The age will impact how much you get to claim, but you definitely get to claim it on older properties. Call, ask the question, and we’ll give you an idea of what sort of deductions may be available prior to your going ahead and preparing it. That part is free.
Kevin:  How often should these depreciation schedules be updated, Brad?
Brad:  Once you’ve done it, it should be right. As we said, the depreciation schedule lasts for 40 years. The only thing is if you actually do some renovations to the property, then you may need to get it updated because you’re changing the things that are there and you’re changing what’s available to depreciate.
Kevin:  Is it just a renovation, or could it be any additions that are made to the property – if we put some new equipment in, for instance?
Brad:  Any renovations or any additions change what you’re able to claim, so you want to ask about that.
Kevin:  Is there any particular time that I should get my depreciation schedule done, Brad?
Brad:  When you need your depreciation schedule is when you’re doing your tax return the first time after you’ve bought this property, the first financial year. If you do it prior to the 30th of June, our fee will be claimable and 100% deductible in the year you actually do it. Doing it before the end of the financial year is best. If you’re doing an adjustment to your tax throughout the year, then whenever you buy the property is the time to get it sorted out.
Kevin:  What about backdating? Can I do that?
Brad:  We find that the best part of 80% of investors are not maximizing this deduction properly. You can easily backdate a couple years of your tax return and go back and get some money from the tax office if you’ve been missing out.
Kevin:  It’s well worthwhile. Would you do an assessment of my situation for me?
Brad:  Most definitely. We’ll have a look at what you’re claiming. Often a guess has been made or something has been provided by the developer at the time and it’s not looking at maximizing your deductions. We’ll have a look at how much you are claiming and see whether or not we can make it any better.
Kevin:  What about the difference between a depreciation schedule and a valuation? Can you explain that to me?
Brad:  Yes, definitely, A depreciation schedule tells you what to claim off your tax as far as depreciation is concerned and relates to the cost of the building. Valuation is quite different. It’s about what is the property is worth to sell at the moment.
Depreciation really relates to construction costs at the time of construction and the market value of some items within there at the time – as opposed to valuation, which is the total you could sell this property for at the moment.
Kevin:  Finally, I just want to ask you this question: “I’m working with my accountant, and normally the accountant looks after the depreciation. Why should I get BMT involved?”
Brad:  That’s probably the second most common question. People think their accountant looks after it. Often they do; they’ll send you off to someone like us to get it sorted out properly. The accountants are my friends. We work alongside them. We’re a specialist just in maximizing this depreciation. We give them one of the numbers of the full tax return. Most of the time, the jobs to BMT actually come referred by the accountant.
Kevin:  I could just say to my accountant, “I want BMT to do this for me”?
Brad:  We’re happy to talk to the accountant before we go ahead and do anything, most definitely.
Kevin:  My guest is Brad Beer from BMT Tax Depreciation Quantity Surveyors. The website is BMTQS.com.au.
Brad, once again, thanks for your time.
Brad:  Thanks again, Kevin.

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