How To Double The Financial Benefit From Your Investment Apartment Right Now
I just came across a new report from CoreLogic that says that residential rents in Sydney are at their lowest level on record – averaging just 3.1 per cent in April 2016.
Low rental returns can be a sign that property investors are relying heavily on negative gearing to offset their cash flow losses against their taxable income.
There is another easy way to improve cash flow that has nothing to do with negative gearing. Yet according to statistics, a stunning 80% of people investing in apartments are failing to use it.
From Negative to Positive Cash Flow
Most property investors don’t realise that apart from negative gearing, they can also boost their cash flow by claiming the tax depreciation benefits associated with their investment.
Real estate experts say that only one in five residential investors makes use of the tax depreciation entitlements available to all property investors. Each year, hundreds of millions of dollars in tax benefits are lost by investors not claiming their legitimate entitlements.
Anyone who purchases a property for income-producing purposes is entitled to depreciate both the items within the building and the cost of the building itself – against their taxable income.
Get an expert
To make a claim for depreciation, a property owner needs to engage a specialist quantity surveyor to complete a Tax Depreciation Schedule. The report will include a value of each and every qualifying plant and equipment item within the property, the cost of construction at the time the building was built and a projection of the deductions claimable by the owner per financial year over a 40-year period.
It sounds tedious but the tax benefits from depreciation can be critical to turning an investor’s negative cash flow into a positive one. Investors who use depreciation can see returns equivalent to up to 60 per cent of the total purchase price of their investment property.
Getting depreciation allowance is particularly important for people who purchased new strata investment properties because the returns can sometimes be equal to several years of rental income.
Be A Proactive Investor
There are many free property depreciation calculators online that you can use to get an estimate. To get a property depreciation estimate, you will need to input the purchase price of your property, the (estimated) year of property construction, closest capital city to the property, standard of finish within the property, and the type of property (residential, commercial, industrial).
Many happy (tax) returns!