Mandy Feng - Coronis

When you become a property investor, it is natural to run into the reduction of your asset’s value as the time passes by and your investment goes through wear and tear. The good news is that you’re entitled to full depreciation deductions and can claim it from The Australian Taxation Office.

CAPITAL WORKS DEDUCTIONS
This deduction has to do with the depreciation of the construction costs of the building and permanently fixed assets of the property, such as concrete and brickwork. If the property was constructed before 15th of September 1987, any construction renovations could be claimed as deductions.

PLANT AND EQUIPMENT DEDUCTIONS
This refers to items within the building like built-in appliances, hot water heaters, air conditioners, carpets, blinds, and any other fixtures and fittings that are outdated.

HOW TO CLAIM DEPRECIATION DEDUCTIONS
To claim depreciation on your investment property, you need to include a depreciation schedule in your tax return. This way, you can deduct depreciation from your pre-tax cash flow and maximise the return.

When you purchase your investment property, all assets within the property are not itemised by value. That’s why in order to claim any tax deductions, you will need to employ a qualified Quantity Surveyor to do a thorough inspection to identify what can be claimed and make valuations in order to create a depreciation schedule for you against two deduction categories.

This is the only way you can legitimately claim tax deductions for depreciation. If you purchase a brand-new property, preparing a depreciation schedule is much easier as the value of the items can be easily determined. If you have an older property though, things become more complicated, and that’s another reason why it is important to use a reliable professional.

By having a full report prepared for tax deductions, you can potentially save thousands and improve your cashflow. If you have any questions about your investment

Investment of any nature is never an exact science and the property market is no exception.

However, there are still some tactics property investors can use when seeking the best possible value from their investment.

Below are some common mistakes you should try and avoid when considering your property investment.

1. Repaying debt indiscriminately
Trying to pay down all your different sources of debt simultaneously can be tempting. However, not all debt is created equal. Certain types of debt come with benefits others don’t have – such as tax deductibility.

2. Forgetting about depreciation
Many property investors often forget to capitalise on tax depreciation deductions, which could mean missing out on thousands of dollars of potential returns.

3. Leaving rents to stagnate
What many investors often forget is that the rental market can move much faster than the property market as a whole, so regularly reviewing the rental amount paid is a great idea.

4. Holding out for an unreasonable rent
On the flip side, investors may inadvertently lose money by stubbornly clinging to their ideal rental asking price, despite little interest from potential tenants.

5. Assuming you know where the value is
Investment decisions should ideally be made based on the potential for wealth generation – something you can’t “just know”, but need to analyse the numbers to determine.

6. Managing your own property
More and more investors seem to think they can do it all, including people attempting to take care of every aspect of managing an investment property.
In the process, they spend more time dealing with tenant complaints than working on the next phase of their investment strategy.
Hiring a property manager will not only allow you to focus on the value-added tasks of your investment business, it will make sure you keep up with any legislative changes, too.