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Maximising Depreciation and Tax Deductions

When speaking to a Senate Inquiry in 1991 Kerry Packer said “Anyone who pays more tax than he needs to is a bloody idiot”.  There are many legitimate strategies for minimising tax, including the following options that relate specifically to rental properties.

Negative Gearing

A rental property is negatively geared if it is purchased with the use of borrowed funds & the net rental income, after expenses, is less than the interest on the borrowings.  The overall tax result of a negatively geared property is a net rental loss arises.  In this case, you may be able to claim a deduction for the full amount of rental expenses against your income when you complete your tax return for the relevant income year. 

If, by negatively gearing a rental property, the rental expenses you claim in your tax return would result in a tax refund, you may reduce your rate of withholding to better match your year-end tax liability.  Additionally, if you have not been claiming Property Tax Allowances, they can be backdated for the previous 4 years.

Property Tax Depreciation

“Over 80% of Investors DO NOT Fully Utilise Their Depreciation Tax Advantages”

The FAAR team has engaged the services of Australia’s leading specialists in depreciation allowances for property to provide you with the maximum benefits in the complex environment of depreciation allowances. 

Depreciation Of Plant

Items of plant as defined by the ATO, including carpets, air conditioning, kitchen appliances, window furnishings, hot water units etc attract higher depreciation rates than the building, irrespective of the building age – a fact often overlooked by accountants applying the lower Capital Works rate only.

Depreciation Of Building Structure

Residential rental properties are generally eligible for building allowances, if construction commenced after 17th July 1985 at a rate of either 2.5% or 4%  per annum.  Building allowance deductions apply to the original construction cost, plus extension, refurbishment or fit out costs of subsequently completed works.

 

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For further information or a consultation please do not hesitate to Contact FAAR

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