New owners who are rentvesting could be missing out on thousands of dollars of tax savings through tax depreciation, says a quantity surveyor.
Rentvesting has grown in popularity in recent years, due to Australians being unable to afford to buy where they want to live, but BMT Tax Depreciation says owners have not been taking advantage of tax depreciation.
“The rentvesting approach to property investing seems to have gained a lot of traction in recent years as it can allow some Australians the opportunity to achieve property ownership without having to sacrifice their preferred lifestyle,” BMT Tax Depreciation chief executive officer Bradley Beer said.
“However, tax depreciation may be an underestimated advantage of this strategy.”
According to research by BMT, thousands of Australians property owners are not claiming every possible tax deduction available, potentially missing out on thousands of dollars in unclaimed deductions.
“Many people in this group may be surprised to learn how their rentvesting strategy can also increase their cash flow as they are legitimately entitled to utilise tax depreciation,” Mr Beer said.
For example, owners who are looking to renovate their property can make tax depreciation claims.
“Renovating an investment property so it is ready for a tenant may initially hit the back pocket. However, rentvestors can recoup some of this initial renovation cost by claiming deductions for them,” Mr Beer said.
“To help stimulate immediate cash flow, investors can claim the full value for assets valued less than $300 in the first financial year. For example, they may be able to claim $265 for a ceiling fan, $250 for a garbage bin and $145 for a smoke alarm.
“There are many other unexpected items within an investment property that may attract valuable deductions for rentvestors, such as ovens, dishwashers and hot water systems.”
These deductions can be made over a property’s lifetime or 40 years, according to the ATO.
“By utilising tax depreciation, rentvestors may be able to work towards expanding their property portfolios or purchasing their dream home sooner than they thought was possible,” Mr Beer said.