Help your clients avoid tax penalties on investment properties ORDER NOW

NBtax Tax Bites

image description

Depreciation allowances Delivering Vast Financial Benefits for Investors

Despite the rocky start to the year, the property market is in full swing with high demand for residential properties, followed by high prices in some markets.

Our NBtax team has been equally busy with several large scale developments in progress. We’ve also helped clients with boutique townhouse projects and investors with holiday accommodation units, and single dwelling properties. Through our compliant and comprehensive depreciation reports, they have achieved more savings through less taxes. 

Here are a couple of recent examples.

Townhouse Development Delivers $145,000 plus in Tax Benefits

Our NBtax team was engaged to prepare depreciation schedules for our client who built a townhouse development of ten units in Brisbane. Our client plans to sell off some of the units and keep the remainder as rental properties. He was entitled to depreciation allowances for the Building (Division 43) and Plant & equipment (Division 40) on the properties. Property Tax Analyst Kristy Bauer inspected the development and calculated the deductions on 10 units, giving our client a total tax savings of $145, 264 for the first year. This is a significant saving which would greatly help to reduce our client’s taxable income. Anyone purchasing these properties as an investment would also be entitled to depreciation allowances as well.

Resort Holiday Accommodation Offers Increased Depreciation Allowances 

Owners of holiday accommodation units in resorts can benefit from a greater rate of depreciation than residential properties. Here’s how one client benefited from our expertise. Our client purchased a two-bedroom unit in a resort at Palm Cove, Cairns and was able to claim 4% depreciation for the Building Allowance, instead of the standard 2.5% allowed for residential properties. In this particular case, the property qualified for the additional rate of depreciation as the resort was a short term travelers accommodation and with more than 10 units. Together with the Plant & Equipment items such as white goods and furnishings, plus a share in common areas such as pool, tennis courts, gym, and other amenities, the investor was able to claim a total of $37, 905 in depreciation for the first year. 

Calculating depreciation allowances may seem straight forward but many inexperienced depreciation schedule providers fail to accurately review all the information available and interpret the correct legislative requirements. The result for investors is often more tax payable, and sometimes penalties for non-compliant depreciation schedules.    

To ensure you receive more depreciation allowances to offset rental income earned, and a compliant depreciation schedule, use only experienced property tax professionals and Registered Tax Agents like NBtax by Napier & Blakeley.