Investors commonly learn about the benefits of tax depreciation after their property has been income-producing for some time. Unfortunately, this is often due to either simply not knowing or having been given misleading advice at some time in the past.
Our clients Lachie and Brooke had held their Perth investment property for since May 2020. They did not realise that they could claim the depreciation deduction. Their new accountant told them to contact us!
When they received their Capital Claims Tax Depreciation schedule, they were shocked by what they could back-claim and what they missed out on claiming for just two months! See their results below.
How many years can you back-claim?
The ATO allows individual and sole trader investors to amend 2 previous years’ tax returns (depending on previous lodgement dates).
Investors who are beneficiaries of a trust, or the potential beneficiary of a trust, are often eligible to back-claim for up to 4 years of amendments.
All other entities, such as self-managed super funds, trusts and companies can amend tax returns lodged within the last 4 years as a standard.
The ATO states the following when it comes to time limits on business and super amendments:
This time period starts from the day after we give you the notice of assessment for the income year in question. This is generally taken to be the date on the notice or, if we don’t issue a notice, the date the relevant return was lodged.
You can submit more than one amendment request within an amendment period.
The time limit gives you certainty about your tax affairs because it means we can’t amend your tax assessment after the time limit has passed. This is except in some exceptional situations such as evasion or fraud.
If you want to change a tax return after the time limit has passed, you can’t request an amendment but you may be able to lodge an objection. While the time limit for lodging amendments and objections is the same, you can request an extension of time to lodge an objection in some circumstances.
How do I back-claim depreciation for previous years?
To best claim depreciation for previous years, firstly, you will need to order a depreciation schedule from a quality tax depreciation provider. Your depreciation schedule starts from your settlement date and your depreciation results will be calculated and presented in financial years. A tax amendment will then need be submitted through the ATO. Either your accountant can submit an amendment on your behalf or, you can if you complete your own taxes. Visit the ATO for more information.
Case Study
In May 2020, our clients Lachie and Brooke purchased a brand-new house that included 4-bedroom, 2 bathroom and 2 car parks, located in Perth for $475,000.
They switched accountants in July 2023 and were told that they had not been claiming their depreciation deduction. Their accountant recommended that they get in contact with us here at Capital Claim Tax Depreciation where we prepared their depreciation schedule.
Lachie and Brooke were entitled to back-claim and claim in depreciation:
Lachie and Brooke were not eligible to claim $3,519 for the 2019-2020 financial year. However, they were eligible to back-claim $22,801 for the 2020-2021 and 2021-2022 financial years. Plus, claim $9,961 for the 2022-2023 financial year. Totalling $32,762 in depreciation deductions over 3 financial years!
Both Lachie and Brooke were extremely happy to be able to back-claim and claim for future depreciation deductions.
How do I find out what depreciation deductions I can claim?
If you have an investment property and have not been claiming your depreciation deduction, get in contact today, call us on 1300 922 220. One of our experts will research your property and will complete a free feasibility for you. Or you can receive a personalised quote plus estimate here by completing our simple online form.
