Property investors missing out on tax breaks

Recent figures from the tax office indicate that 2.8 million property investors claimed deductions relating to their rental property in the 2012-13 financial year.

Analysis of these figures by BMT Tax Depreciation suggests that property investors are missing out on significant tax deductions.

“Of these investors, just over one million received an average capital works deduction of $2,113, while almost two million investors claimed an average deduction of $1,179 for depreciation of plant and equipment, making the total average depreciation claim made by property investors who claim both in the 2012-13 income year $3,292,” BMT said.

“When compared with statistics released by the ATO for the 2011-12 income year, there was an increase of almost 100,000 in the total number of investors claiming deductions for their rental properties.

“Despite this, there was very little change in the average deductions claimed for capital works or plant and equipment assets.”

Speaking to The Adviser’s sister publication, SMSF Adviser, BMT chief executive Bradley Beer said he is confident many investors missing out on these tax entitles are investing through their SMSF, and although SMSF trustees are typically “a little more sophisticated” than an average property investor, he believes they are often not entirely across the depreciation benefits they can claim.

Furthermore, Mr Beer expressed concern about the change in the knowledge levels of SMSF investors over time.

“Since the borrowing rules over the last number of years have been relaxed around property for SMSFs, even though they’ve tightened them up again now, people were probably putting properties into SMSFs [when they shouldn’t have],” he said.

“They’re probably less sophisticated than what they were in the past, but possibly a little more sophisticated than the general investor into property.”

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