Steps In Estimating Property Depreciation Accurately

Buyers of residential investment real estate in Brisbane, Australia can frequently enjoy an extremely helpful tax savings. Remarkably, every year many investors overlook this deduction, even though, depending on their individual circumstances, they might save quite a bit of money by taking the small efforts required to file a documented claim.

What is this tax savings? Two special types of depreciation may apply to property built after July, 1985. Let’s consider these special provisions in the tax codes and steps necessary to claim them.

Two Types of Depreciation

Residential property buyers usually possess the ability to seek depreciation within the first two years of purchasing a residential real estate investment in Australia. Investors often benefit greatly from these savings, because they do not encounter recurring expenses in collecting these tax benefits; they merely need to complete all the necessary steps to claim it properly.

The Australian Tax Office (the “ATO) permits buyers to seek depreciation on two separate items: the building allowance and the plants and equipment. The first depreciation relates to costs involved in completing the physical structure and grounds, for example, bricks, mortar and cement. The second form of depreciation concerns items of removable fixtures that exist within the building, items such as carpeting, drapes, blinds, and kitchen appliances.

Taxpayers who comply fully with the applicable law may often depreciate both types in properties build after July, 1985, resulting in considerable tax savings sometimes.

Complying With Documentation Requirements

Documentation requirements set forth by the ATO sometimes confuse taxpayers, although the process of fully documenting depreciation does not involve a lot of work on their part.

In order to claim full depreciation costs on the physical grounds and fixtures, taxpayers should retain a professional called a Quantity Surveyor to inspect their recently purchased buildings, ideally immediately following purchase and before a tenant assumes residence at the site. The Quantity Surveyor possesses the training and skills to accurately estimate the building costs if necessary.

This person will also enumerate and photograph every item subject to depreciation, insuring maximum savings for the taxpayer. Following the inspection, the Quantity Surveyor generally requires two to three weeks to prepare tax depreciation schedules for the benefit of the taxpayer and the taxpayer’s accountant.

The ATO regulations require a trained Quantity Accountant to conduct the highly technical estimation. Most of these professionals belong to the AIQS (the Australian Institute of Quantity Surveyors), a professional organization.