25 Mar Maximizing depreciation for your taxes
Brad Beer, from BMT Tax Depreciation, tells us how you can make money from removing asbestos from a property and what is the most tax effective way to improve a property.
Kevin: My guest once again is Brad Beer from BMT Tax Depreciation.
Brad, I want to focus this time a little bit more on some of those renovation issues that we’ve already touched on. But I want to go a little bit deeper into them, particularly the area of hazardous materials.
We’re seeing a lot of asbestos now needing to be removed from some of these renovations. Can I claim that?
Brad: Yes. It’s not actually a depreciation claim necessarily. It’s an instant claim a lot of the time for the removal of these materials. I guess it’s probably the tax office saying, “We really want these things gone, and so therefore, we’ll allow you to make a deduction for the removal of these things,” because you’re more likely to get rid of them that way.
Kevin: Would you do that for me, or do I need to get my own quotes and give that to you?
Brad: Because it’s not actually a depreciation claim – usually, it’s a direct cost –we’ll work with the accountant to make sure that’s one of the things that you claim.
Kevin: One of the questions I’m asked quite often is about the age of the building. Does it depend on the age of the building as to its availability for depreciation?
Brad: Once again, it’s one of the most common questions. People seem to think it’s only on new properties or fairly new properties. I want to take age out of our minds in relation to this. Yes, the age does impact on how much you can claim, but older properties still get depreciation. It’s often just a bit less.
We’ll always talk to a client about their property, about what it is, and we’ll make sure that it’s going to be enough deductions there for them before we go ahead and do anything. It’s free to get an idea of what sort of deductions may be there.
Kevin: When I’m renovating, can I actually claim my own labor?
Brad: Yes, that’s another regular question. Because you actually don’t pay for your labor, it’s much cheaper than what you would pay someone else because you put your blood, sweat, and tears into it instead. Effectively your own labor, unless you pay yourself for the work, it’s not a claimable part of the cost for depreciation.
Kevin: You must see a lot of renovations, and obviously, you’re doing the bulk of the tax depreciation schedules. What are you seeing is the most tax effective way to improve a property?
Brad: Firstly, making sure it’s an investment property when you do improvements, so you have some deductibility.
Sometimes the things you put in there will make a bit of difference as to what you can claim. Carpet has a quicker claim than tiles, for example, and so do floating timber boards. You get to claim them as plant and equipment as opposed to being part of the structure.
Your decision on a lot of these things isn’t just going to be about the depreciation; it’s going to be about your property and what’s the best for the best valuations and the best rental returns etc. But we can always talk to you about some of the things that you can do – like the carpet instead because you will get to claim it a little bit quicker.
Kevin: I suppose that’s all about doing the research. You’ll come out and give me an assessment on the property?
Brad: We’ll have a look at the plans and have a discussion. We can tell you what you’re doing and what we think you could change to help maximize your depreciation, definitely.
Kevin: Going past that assessment stage, what does it cost to get a depreciation schedule done?
Brad: When we identify that it is worth it for you and we’re going to get some deductions for you, we charge a fee of $650 plus GST, which is $715, which includes us coming to site, doing the inspection, and doing a full depreciation schedule that’ll tell your accountant what to claim for the next 40 years of owning that property.
We also offer a guarantee that says unless we can find twice that in deductions in the first full financial year or even additional deductions to what you’re doing, we’ll give you the money back.
We talk to you about your property first, we make sure it’s worth it, and if we’re wrong, we’ll back it and give you your money back.
Kevin: Excellent. What about the timeframe? How long does it take to do one of these?
Brad: We need to get access to the property, so we have to work around your tenants and keep them as happy as we can. Normally, within a week or so, they’ll let us in. After that, seven working days, you’ll have your report, providing we’ve got the information we need to do it.
Kevin: The final question I want to ask you is about my accountant. I’m working with an accountant. How closely do you work with them, or are they separate?
Brad: We provide only one number for them each year in a tax return or a couple of numbers. We talk to them about the property sometimes. They’re our friends. Most of the time, people are calling us up because their accountant said to call us and get one of those depreciation schedules. We’re the specialists just in this area of depreciation, and they’re our friends; we work alongside them.
Kevin: Yes, wonderful. Brad Beer from BMT Tax Depreciation Quantity Surveyors. The website is BMTQS.com.au.
Brad, once again, thank you very much for joining us.
Brad: Thanks, Kevin.