Pete Wargent blogspot

Co-founder & CEO of AllenWargent property buyer's agents, offices in Brisbane (Riverside) & Sydney (Martin Place), and CEO of WargentAdvisory (providing subscription analysis, reports & services to institutional clients).

5 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.

"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he is one of the finest property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

"Pete is one of Australia's brightest financial minds - a must-follow for articulate, accurate & in-depth analysis." - David Scutt, Business Insider, leading Australian market analyst.

"I've been investing for over 40 years & read nearly every investment book ever written yet I still learned new concepts in his books. Pete Wargent is one of Australia's finest young financial commentators." - Michael Yardney, Australia's leading property expert, Amazon #1 best-selling author.

"The most knowledgeable person on Aussie real estate markets - Pete's work is great, loads of good data and charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, and author of the New York Times bestsellers 'End Game' and 'Code Red'.

"The level of detail in Pete's work is superlative across all of Australia's housing markets" - Grant Williams, co-founder RealVision - where world class experts share their thoughts on economics & finance - & author of Things That Make You Go Hmmm...one of the world's most popular & widely-read financial publications.

"Wargent is a bald-faced realty foghorn" - David Llewellyn-Smith, MacroBusiness.

Saturday, 5 July 2014

Depreciate!

A guest post today from fellow Chartered Accountant and registered tax agent George Morice of IFH Group on the topic of depreciation schedules for property investors.

Read on...

Why is depreciation so important to property success?

The golden words you want to hear in relation to your property investment are “non-cash deductions”. 

These are items you can claim back for tax but you don’t have to pay cash for.

The only way to do this comes through Division 40 (Depreciation) and Division 43 (Building Write-Off) of the Income Tax Assessment Act.

What this means for you?

Kerry Packer said it best on tax when addressing the Australian Federal Parliament: 

"Now of course I am minimising my tax. And if anyone in this country doesn’t minimise their tax they want their heads read. Because as a Government, I can tell you you’re not spending it so well that we should be donating extra.”

For every dollar of depreciation, that will be one less dollar you have to pay tax on. Over the life of your property this will save you thousands and thousands of dollars.

What can I depreciate?

Division 40 includes a huge range of common items found inside and outside the home, a few potential ones include:

Hot Water Units
Air-conditioning Units
Celling Fans
Vinyl
Ovens
Dishwashers
Furniture
Bathroom Items
Rangehoods
Cooktops
Microwaves
Washing Machines
Carpet
Floating Timber Floor
Blinds
Solar Panels

Division 43 covers the depreciation of the building structure and immovable items. 

These items depreciate at a much slower rate than items under Division 40. They depreciate at either 2.5% or 4%. 

Potential items include:

Building Cost
Duct Air-conditioning
Fencing
Letter Box
Decks
Swimming Pools
Fixed Timber Floor
Downpipes
Wooden Louvers
Plaster Ceilings
Renovations
Tiling
Shelving
Toilets /Vanities
Kitchen Cupboards
Paint

How do I do I get a report?

To get all of this information prepared you will need to engage the service of a quantity surveyor who specialises in depreciation reports. 

The surveyor will assess your property and make sure that no deduction is missed and that it is all done within the tax office (ATO) guidelines. 

The surveyor will then create a report which you can use for many years moving forward.

Sounds great, but how much will it cost me?

The general cost is around $770 for the report. 

If your accountant specialises in property they will most likely have relationships with quantity surveyors and should be able to get you a discount on this fee.

In terms of value, this is a great deal as not only are the fees tax deductible but many quantity surveyors will give you a guarantee that the deductions for the first year are twice the fee amount!

In my experience, the savings are much more than this and over the life of the property, and the deductions will save you thousands of dollars.

I bought the property a few years ago; can I still get the deduction?

Generally your tax agent can amend your tax return to back date your deductions and get back the tax paid for the past two years, giving you even more reason to get the report done today.

Depreciation is a great tool for an investor to make sure they are maximising the return on their property investment.

If you have an investment property and do not have a depreciation report, I would highly recommend getting one done as soon as possible.

It will be one of the best decisions you make this year.