Tax deductions

Investors could miss out on tax deductions

Real estate investors who have used rental properties could miss out on significant depreciation tax deductions.

A BMT Tax Depreciation analysis found that about two-thirds of used properties had undergone some form of addition or renovation in the past three years.

BMT Tax Depreciation CEO Bradley Beer said many real estate investors are unaware that they can claim depreciation on older used properties.

“In November 2017, the government changed the way investors claim depreciation of plant and equipment assets – in particular, depreciation of previously used plant and equipment assets can no longer be claimed. “Mr. Beer said.

“This has led many investors to misunderstand the changes and not claim depreciation at all – missing out on what could be thousands of dollars in return at tax time. “

However, it is important to note that under the legislation, the capital works deductions available on the structure of a residential property built after 1987 have not been affected.

Mr Beer said those properties accounted for 85 to 90% of depreciation claims. This means that owners who renovate old investment properties can claim deductions for eligible capital work and depreciation of newly installed plant and equipment assets.

“Let’s say a property was built in 1980 and the new owner bought it as an investment in 2021, then neither capital works nor plant and equipment depreciation allowances are available on the structure. original, ”he said.

“However, if it has undergone some form of structural renovation since 1987, even by previous owners, deductions for capital work might be available – in addition to any deductions related to newly added fixtures and fittings.

Mr Beer said it was essential for investors to perform physical inspections of the site to ensure every addition or renovation is identified and evaluated by a specialist.

“Some renovations and additions are difficult to identify and see the extent of the work, so investors in older properties should not rule out depreciation up front,” he said.

“Instead, contact a specialist who will find deductions on renovations made and increase the annual cash return. “

Photo by Milivoj Kuhar on Unsplash.

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