Are you making the most of investment property tax deductions?

As an investor, there’s a good chance you already claim some depreciation on your investment property. However, you might not realise there are deductions you could be making on smaller items within your property. That could mean valuable savings at tax time.

You might be able to claim the depreciation for your investment property of ‘plant and equipment’ – that’s fixtures or items that can be easily removed – and ‘capital works’, which are the structural elements of your building.

‘Plant and equipment’ means items like hot water systems, carpets, stoves and air-con systems, while capital works deductions can be claimed for the historical construction costs of the building including wiring, doors, and even tiles and toilets. Apartment investors take note – you can also claim a stake in the depreciation of common facilities like lifts, pools and gyms.

Paying closer attention to detail could see you much better off in the long run.

Don’t overlook the less obvious deductions.

There may be more things you can claim on tax than you realise. Quantity surveyors BMT Tax Depreciation say the top five deductions most overlooked by investors aren’t the big-ticket items like hot water systems or garage doors but actually include:

1. Freestanding garden sheds
2. Solar garden lights
3. Intercom systems
4. Ceiling fans
5. Tennis court nets.

Other tax deductions on investment property that are often missed are freestanding bathroom accessories, door closers (yep, the thing that lives in your sunglasses holder), garbage bins, exhaust fans, synthetic lawns, roller door motors, and swimming pool cleaning systems.

You might be able to deduct items you didn’t even know existed.

Every little bit counts.

Many investors remember to claim depreciation on larger items – like carpet and washing machines – but it pays to sweat the small stuff.

It’s estimated that claiming the cost of smaller household assets such as shower curtains, smoke alarms and lawnmowers in your rental place can actually increase the cash flow generated by the property by around 15 per cent .

Invest in a depreciation schedule for your investment property.

Having a depreciation schedule drawn up by a professional quantity surveyor will help you make the most of depreciation claims while sticking to the rules. The Tax Office does offer online guides for depreciation claims but it’s a complex area and a rough estimate won’t meet their stringent requirements.

Even the cost of having the schedule drawn up can normally be claimed on tax. You may also be able to go back and amend tax returns for previous years if it turns out you’ve underestimated prior year’s depreciation costs.

Tax isn’t an area where you should muck around. It’s important to get this right, both so you have a robust investment and to keep all the right boxes ticked with the ATO. Work together with a professional and start making the most of your investment property tax deductions – big and small.