Depreciation measures how much of your asset’s value has been used up – and this will help you reduce the tax you pay.
If you buy an investment property, naturally it will suffer from wear and tear over time. From a tax and accounting point of view, there are two types of depreciation.
The first one is depreciation on plant and equipment. This counts the depreciation on things like floorcoverings, ovens and dishwashers. The second type is depreciation on building allowance, and this factors in depreciation on things like brickwork and concrete.
Each year you can claim either or both types of depreciation as a tax deduction, thereby reducing the amount of tax you pay. (Cool, yes?)
A qualified quantity surveyor is authorised to calculate a depreciation schedule, and their fees are generally tax deductible.
Provided they can gain access to your property to do the inspection quite quickly, they can usually develop your depreciation schedule within a few weeks.
If this is the first time you’ve realised that you could have claimed depreciation, your accountant can amend up to 2 years of your tax returns, so you may still be able to gain some past tax benefits.
At Ink Wealth, we’ve helped lots of investors to successfully navigate the ‘ins and outs’ of property investing, and we’d be pleased to talk it over with you. Contact us today to learn more.