Bradley Beer, the CEO of BMT Tax Depreciation, said that while depreciation deductions provide a valuable opportunity for investors to maximise their cash flow, this could be reduced if they incur penalties from the ATO for failing to lodge their tax returns on time.
“Earlier in the year, the government proposed changes to rules surrounding plant and equipment deductions and the proposed legislation was recently introduced into parliament,” Mr Beer said.
“The new legislation intends to limit plant and equipment depreciation deductions to only those outlays actually incurred by investors in residential properties and those who purchase brand new investment properties.
“Investors will be happy to know that existing investments, where contracts were exchanged prior to 7.30pm on the 9th May 2017, will be grandfathered. However, should the new legislation be passed through the senate, the new rules will apply to properties in which the contracts were exchanged after this date.
“Some investors may feel left in the dark about how these rules will affect them and I would encourage people in this group to get in contact with an expert Quantity Surveyor and Accountant to ensure they are claiming every legitimate deduction they are entitled to,” said Mr Beer.
Quantity Surveyors can inspect a property and outline the available deductions in a tax depreciation schedule, which can then be shared with an investor’s tax agent.
According to the ATO, deductions are split into two categories – capital works allowance for the walls and floors of a building and plant and equipment deductions for the removable assets contained within it.