Make the most of property tax deductions

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INCOME is liquid gold for property investors, but many do not properly understand the thousands of dollars they can claim back from the taxman through depreciation of household items and building costs.

Four out of five of Australias two million residential property investors are not making the most of annual depreciation deductions, industry experts say.

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There can be hundreds of potential deductions, so what delivers the biggest tax bang for your buck? Three things, says BMT Tax Depreciation CEO Bradley Beer: ducted airconditioners, floating timber floors and solar power systems.

In the first financial year alone, these three items could result in about $3400 in deductions for the owner, he says.

Thousands more dollars can be claimed through other deductions. BMT says hot water systems and bathroom accessories are among the most common, while smaller items such as smoke alarms, garbage bins and exhaust fans also help.

If its an individual asset and not part of a set such as a table and chairs and is worth less than $300 each, its an instant deduction, Beer says.

A depreciation schedule typically costs about $700, and its best to go with a company that sends a quantity surveyor to your property rather than a cheaper online service.

Investors who havent depreciated correctly can back-claim deductions in most circumstances. Its easy to go back two years and adjust previous tax deductions, Beer says.

Muirhead Property Management director Prue Muirhead says many property investors understand that they can depreciate curtains, carpets and lights, but do not understand the big ticket deductions such as the annual 2.5 per cent writedown of building costs of many houses.

Most people believe that the only return you are going to get is the rental return, and forget to add the depreciation, she says.

The building cost deduction, based on a $200,000 structure, can be $5000 a year, and thats before you get to all the fixtures and fittings.

Muirhead says many deprecation companies guarantee that you will get more money back than the fee they charge. You just dont know what youre missing out on unless you look into it, she says.

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