dep presentation

8/6/2019 Dep Presentation

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TAX DEPRECIATION &TAX DEPRECIATION &CAPITAL ALLOWCAPITAL ALLOWANANCESCES

An Outline of Tax Deduction and CapitalAllowances for Residential andCommercial Investment Properties

REDLINE QUANTITY SURVEYORS


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What is Tax Depreciation?What is Tax Depreciation? Tax Depreciation is a tax deduction available

to the owners of income producing residential

and commercial investment properties An incentive introduced by the Federal

Government to encourage Australians toinvest/save for their retirement


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Typical Investment PropertyTypical Investment Property

AnalysisAnalysis The purchase price of a typical residential

investment property can be analysed for tax

depreciation purposes in the followingmanner:

Land (non-eligible)

Division 40 items (Tax Depreciation)

Division 43 items (Capital Allowances) Non-eligible items (Site works and soft

landscaping)


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Division 40 ItemsDivision 40 Items Tax deductions for capital expenditure incurred on

plant and equipment including but not limited to:

Carpets Curtains / Blinds

Whitegoods

Air-conditioners

Current rates of depreciation range from 5% p.a.to 40% p.a. of the total allowable cost


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Division 43 ItemsDivision 43 Items Tax deductions for Capital Works

Building structure (slab, walls, roof, etc)

Includes driveways, swimming pools, etc Current rate of depreciation is 2.5% p.a. of the

original applicable construction cost


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WhoWho can claim?can claim?

WhenWhen ccan Ian I claim?claim? All owners of income producing investment properties

can claim a tax deduction

Division 40 items are claimable irrespective of ageand date of construction

Division 43 items can be claimed if the residentialproperty commenced construction on or after 18July 1985


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WhatWhat costcost//valuevalue mustmust II useuse?? Division 40 items are based on the cost to the

taxpayer. This cost must be reasonable and take into

account the items age, condition and replacementcost

Division 43 items are based upon the historical costto construct the building at the time it was built


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WhyWhy engageengage a Quantitya Quantity

Surveyor?Surveyor?

As the Division 43 items require an estimate of theoriginal construction cost, an independent expert in

the estimation of construction costs is required A Quantity Surveyor is a university educated

construction consultant that specialises in theestimation and cost control of construction projects


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Can my AccountantCan my Accountant prepareprepare aa

Tax Depreciation Schedule?Tax Depreciation Schedule? No! In years gone by, Accountants and Solicitors

prepared Tax Depreciation Reports on behalf of theirclients. This is no longer permitted


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WhatWhat shouldshould I look for in aI look for in a

Quantity Surveyor?Quantity Surveyor? A firm that has a proven track record in the

preparation of Tax Depreciation Schedules

A firm that also prepares construction estimates forcurrent day projects so that an accurate database ofconstruction costs is available

A firm that employs Associate Members of theAustralian Institute of Quantity Surveyors (AIQS)


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HowHow muchmuch shouldshould a Taxa Tax

Depreciation ScheduleDepreciation Schedule costcost??

Depending on the age, location and otherinfluences, Tax Depreciation Schedules forthe majority of low-rise residential propertiescost between $330 and $440

Tax Depreciation Schedules for high-rise

residential properties take longer to prepareand generally cost between $440 and $660


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Which isWhich is best?best? New orNew or old?old? In general terms, the newer the property, the better

the tax deduction will be

Older properties still attract depreciation deductionsbut as construction costs have risen depreciationdeductions have risen proportionately

If the return on investment is comparable between anew and second hand property, the better way to go,in terms of tax depreciation, is usually the newerproperty

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