Tax Depreciation

The other day I saw someone in an interview say “It’s never too late to claim depreciation.” Now in fairness, perhaps in the following sentence, they added some caveats but even though I tuned out and got back to work, I don’t think that’s a prudent way to start a discussion about deductions, whether you’re back claiming them or otherwise.

It is important to understand that it certainly can be too late to claim depreciation deductions. For example, in one of our research studies of a sample of 1,000 of our residential property investor clients, 6.7% of them waited more than two financial years after purchasing their property to organise a depreciation schedule.
The significance of this is based around the fact that you can back claim up to two financial years’ worth of depreciation deductions. Your accountant needs to go back and file an amendment for previous years tax returns. It can certainly be done, but in general terms two financial years is the maximum. Therefore, our data specifically showed that 6.7% of the investors would miss out on deductions even allowing for the two year back claim.
What would that mean to them in real terms? Well on average, they each lost $20,537. That’s a fair chunk of deductions and could easily be $7,000+ gone from their back pocket.

As a result, I’m here to say it certainly CAN be too late to claim depreciation. There is some good news though, the time it takes for an investor to organise a schedule is going down. Our data from 2016/2017 showed an average time of 691 days for investors to organise a schedule which is just inside of two years. In 2019 that figure was 524 days or 1.4 years, a total decrease of 24%.

So the education around the entitlements seems to be helping ensure that people don’t miss out, but it’s important to remember that these are averages and we saw one investor wait 18 years to organise a report on a unit they bought brand new, I don’t even have the heart to tell you how much they lost in potential claims.

In closing, it can be too late to claim depreciation. However, if you’re worried that you may have missed out, minimise any potential damage by speaking to a tax depreciation expert as soon as possible and be reach out some free advice on your potential claims.

Mike Mortlock is a Quantity Surveyor and Managing Director of MCG Quantity Surveyors. MCG Specialise in Tax Depreciation Schedules and Construction Cost Estimating. You can visit them at www.mcgqs.com.au Mike Mortlock is a Tax Depreciation expert, Quantity Surveyor and Managing Director of MCG Quantity Surveyors. He is a regular speaker and commentator having been featured in the Financial Review and Sky Business. MCG Specialise in Tax Depreciation Schedules and Construction Cost Estimating for investors. You can visit them at https://www.mcgqs.com.au