Most successful property investors will agree that having a great team of consultants, including a good accountant, is a fundamental part of maximising financial success and ensuring proper compliance with relevant legislation, including ATO requirements.
We always recommend that our investors engage a good accountant, however we also respect that many investors may only have a single investment property and relatively simple tax reporting requirements, and prefer to look after their own accounting and tax returns via the ATO’s myTax portal.
Every year we receive many phone-calls (particularly around tax lodgement times) from property investors asking how to record their tax depreciation deduction in their tax return. If you are choosing to DIY Your Tax Return and you are a property investor, here are some tips to help you along.
How do I work out what my tax depreciation deductions are?
The best way to achieve the maximum tax depreciation deductions available to you from your investment property is to order a tax depreciation schedule. You can order one from a qualified quantity surveyor like us. Our tax depreciation schedule will capture your available depreciation deductions, we are ATO compliant, registered tax agents and the “one-off” fee for our tax depreciation schedule is also 100% tax deductible.
I have a Capital Claims Tax Depreciation Schedule – what information do I need to enter?
A Capital Claims Tax Depreciation schedule will outline each financial year’s depreciation deductions, projected forward for 40 years from your settlement date. You must establish if you will be using the Diminishing Value or the Prime Cost method of depreciation (and an accountant or financial planner may be able to help establish which is best for your whole financial situation). Once you have chosen your method, you will use this method going forward every financial year.
If there are two or more owners of an investment property, each owner will have a percentage share of ownership. The most common splits that we see are 90/10, 70/30 and 50/50 – however, this can be any division of income and expenditure.
When reading your Tax Depreciation Schedule – check and see if division of assets has already been applied in the report for you – if you see more than one set of schedules or a percentage of ownership next to your name, this will be a ‘split tax depreciation schedule’.
A split schedule will give individual figures for each person. If we look at a 50/50 split, there will be two tax depreciation results within your Capital Claims Tax Depreciation Schedule. A set of results and claims for yourself and a separate set of results and claims for the other person. When preparing your DIY Tax return, you will only need to enter ‘your’ deductions results into your MyTax calculations.
Where do I enter my tax depreciation deductions?
Using MyTax or MyGov, there will be a clear ‘Rent’ category – this is where all of your investment property information needs to be added. It will allow for you to put an address and description as well as all of the applicable details for that property:
- Gross Rent;
- Interest Deductions;
- Capital Allowances deductions (refer to your schedule’s Division 40 tax deduction amounts for any Division 40, Pooling or Scrapping amounts that are claimable in that year);
- Capital Works Deductions (refer to your schedule’s Division 43 tax deductions amounts for any Division 43 amounts that are claimable in that year);
- Other Rental Deductions ie. cleaning.
Below is an example of our client who choose the Diminishing Value as stated above. Under the ‘Rent’ category they would add their rental income and other expenses for the year.
Then, using their Capital Claims Tax Depreciation Schedule for the financial year 2022-2023, they can complete the Capital Allowances Deduction field by adding the figure of $7,786 ($4,298 – Division 40 + $3,488 – Pooling) as shown below. In the Capital Works Deductions field (known as Division 43 in our tax depreciation schedule), they would enter the figure of $8,448.
Totalling $16,234 in tax depreciation deductions for the 2022-2023 financial year.
You must keep records
As per the ATO, you must have the right records for the claims that you make. You will need details of:
- all rental income earned
- interest charged on money you borrowed for the rental property
- other expenses relating to your rental property
- if applicable, the period your property was genuinely available for rent
- any expenditure on capital works to your rental property.
See simple steps when preparing your return for useful guidance on how to show your income and expenses.
Again, you are responsible for the claims you will be making. You will need to make sure that they are all legitimate deductions and include all of your income before you lodge.
I don’t have a tax depreciation schedule how do I order one?
It’s simple! You can either give us a call on 1300 922 220, email us at firstname.lastname@example.org or order online here. We will give you a personalised quote and estimate of what tax depreciation deductions are available to you.
As always if you do need help reading your tax depreciation schedule come tax time, please call us. We are always happy to answer any questions you may have.
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