One of the great things about purchasing and owning an investment property is the fact
that it can help you save tax, that you can actually claim the expenses and some of the
depreciation against the rental income so you are not paying as much tax as you might
have been earning that money from somewhere else, here I have five tips for saving tax
on your investment property. Tip number one is building depreciation and
it still amazes me to this day how few people actually claim this depreciation on their
property, building depreciation is depreciation that you can claim on the building itself
that might be a house, the way that you claim this is based on construction costs.
For most properties I think it's after 1987 there's a certain date I can't remember the
exact date of the top of my head, you can claim 2.5% per year for 40 years between 85
and 87 I think is you can claim 4% for 20 years, you can claim two and a half percent
of the construction cost over the space for 40 years, how do we find that construction
cost. I believe the best way to find that out is to get a quantity surveyor to come
in and to do a depreciation schedule for you both on the building and the plant and equipment
which will talk about next. By getting a quantity surveyor they know this,
this is their job this is what they do you can get an accurate calculation and be claiming
as much as possible. Tip number two is plant and equipment depreciation,
plant and equipment depreciation is depreciation of assets within your property, things like
carpet, floor boards, curtains, light fittings, fixtures all those sort of things that you
need to replace from time to time because they wear out, they get old and you need to
upgrade them can be deviated over time. Depreciation is very complex when it comes
to plant and equipment, that's why I created a full blog post about this and I will go
into it in more detail, if you want to do it yourself it's going to be very complex
to do, you can again pay a quantity surveyor to get this done for you they understand the
tax laws how quickly you can depreciate certain assets, how they are to be depreciated because
there are two different ways of depreciating assets and they can do everything for you.
There are some quantity surveyors who actually offer a guarantee that the tax savings that
you will obtain through your report will actually be greater than the cost of the report, it's
something worth looking at. Tip number three is to track all of your expenses,
one of the thing that stops people saving the more tax in their property is the fact
that they forget to keep receipts and they forget they made property related purchases
at all, if you are making purchases that relate to your investment property and relate to
that generating your income for you then track all of those expenses, keep your receipts
and keep them to your account at the end of the year you will be able to tell you which
ones you can claim and which one you can't claim but the fact is if it's for the property
then the chances are you are going to be able to claim the majority of it.
Tip number four is to track your expenses for trips to the property, let's say if you
live in new south wales and you've invested in a property in Queensland there are rules
that say you can go and inspect that property and you can claim the expenses that are associated
with going to inspect that property, that might be a flight out a flight back at ion
nights' accommodation to stay there. A lot of people do add a holiday on to the
back of this you need to be careful with that because you can only claim the expenses that
are related to the property, you can't go in a 10 day holiday and claim the entire holiday
as a property expense but you may be able to claim the flights back for yourself and
one nights accommodation for yourself as well. I do suggest you speak to a professional tax
accountant about this because they will help you maximize your returns and get the most
of the expenses that you deliver without going overboard and without breaking the law.
Tip number five is what's called a scrapping schedule which I've done a video on in the
past, basically if you're doing any renovations or replacing anything major let's say the
carpet you can get a quantity surveyor to do a scrapping schedule and basically what
the quantity surveyor will do will effectively measure how much of the value of that item
is left and then you can then claim that as a depreciation.
If you are ripping out the carpets they cost you $2000 when you first put them in and then
now worth $400, well you've got $400 left that you haven't reclaimed, you can scrap
that for a 100 because you are replacing them with new ones and then you can claim that
for a $100 as a tax you spent obviously that's an example don't use that in your personal
life get a professional to do it for you. There's five tips for saving tax on your investment
property you can get more videos, articles and audios just like this one by heading over
to the blog at positivecashflowaustralia.com.au or if you are on your mobile phone and that's
too long to type just type pca.im and that will redirect you to the website.