Tax Return

[Compleks]

Hello everyone.

I just wanted to follow up on my tax return from this year. I bought my first ip in December last year. I had a depreciation schedule written up as well.
I bought the property for $272,000.

I have attached two screenshots from the depreciation schedule.
"diminishing value method summary" is blue
"prime cost method summary" is green

The total depreciation figure is either $3292/or/$4047.
Can someone help explain how this translates to my tax return?

My tax return for the year (12-13) was $3,250.
My bill from the accountant was $500

I guess I was expecting more for some reason. But that said, i really have no knowledge on how it all works.
So I was just after some more experienced advice/input on my return.

I'm not sure if that's enough information to really make any judgement, but I can provide further details if needed.

Thanks for taking a look

 

[Terry_w]

Hello everyone.

I just wanted to follow up on my tax return from this year. I bought my first ip in December last year. I had a depreciation schedule written up as well.
I bought the property for $272,000.

I have attached two screenshots from the depreciation schedule.
"diminishing value method summary" is blue
"prime cost method summary" is green

The total depreciation figure is either $3292/or/$4047.
Can someone help explain how this translates to my tax return?

My tax return for the year (12-13) was $3,250.
My bill from the accountant was $500

I guess I was expecting more for some reason. But that said, i really have no knowledge on how it all works.
So I was just after some more experienced advice/input on my return.

I'm not sure if that's enough information to really make any judgement, but I can provide further details if needed.

Thanks for taking a look

What exactly did you want to know? Depreciation is an expense which reduces your profit. It is a non cash expense so you don't actually have to pay for it each year, but can claim it.

Is it an older property? Figures seem a bit low, did a QS do a report for you?

 

[Compleks]

It is an older property yes, but had a few basic renovations done to it.
The depreciation schedule was done by a QS.

I didn't have any specific question really. It's just a subject I know very little about, and wanted to make sure I was getting back a decent return. Which I'm sure would take more than the information provided to figure out, but thought it might give a rough idea at least.

Thanks for the response Terry.

 

[westminster]

Just remember that you claim it as a 'loss' so it just reduces your taxable income, you don't claim it and get that exact amount back.

All the losses are minused from your income to produce your new taxable income then they work out how much tax you should have paid based on that amount.

If the amount of tax you have paid over the year exceeds that amount then you get your payment/tax refund made to you from ATO.

 

[Compleks]

Just remember that you claim it as a 'loss' so it just reduces your taxable income, you don't claim it and get that exact amount back.

All the losses are minused from your income to produce your new taxable income then they work out how much tax you should have paid based on that amount.

If the amount of tax you have paid over the year exceeds that amount then you get your payment/tax refund made to you from ATO.

Thanks for that Westminister.
I wasn't expecting that full amount back from the depreciation schedule, but wasn't quite sure how it all worked together. You explanation gives me a much better idea though, thankyou.

 

[Peter_Tersteeg]

What it actually means is if you're income is in a 30% tax bracket, you can probably expect about 30% of your losses back as a tax refund. It's more complex than this, but it will put you somewhere in the ball park.

In this instance, it looks like you've got some depreciation losses, along with other holding cost losses such as interest (less than the rental income), rates, management fees, etc.

As the owner of a single property worth under $300k, it looks about right.

 

[Compleks]

Thanks Peter

 

[depreciator]

Depreciation is just another tax deduction. When you do your tax, it goes into the mix with your other deductions on the property: loan interest, council rates, water rates, property manager fees.
In the blue table, the summary for the Diminishing Value method, the tax deduction for depreciation is $4,047.17 in the 12/13 tax year.

 

[rowena]

If this is going to be a long term property investment then use the depreciation schedule of the blue. The reason is you have more total in deductions then the green. The blue has a total of 39679 and the green 38491 in deductions over the life of the deduction period. Just remember once you choose a depreciation schedule you cannot chop and change, and you have to stick to that one.

If it is only going to be a short term investment then pick the one that will give you the most deductions now and for the term of the investment.

 

[speary]

Both the schedules will give the same result over a longer period. That only shows 10 years and there will be assets with a life of 12 years (HWS and Stove) and 15 years like carpet.

The diminishing value method results in higher depreciation in the earlier years.

 

[Compleks]

Thanks for all the replies, as usual very helpful

 

[depreciator]

assets with a life of 12 years (HWS and Stove) and 15 years like carpet.

Carpet has a ten year Effective Life.

But it's largely irrelevant anyway. Nearly every investor uses the Low Value Pool and in typical properties all Assets end up there pretty quickly and get written-down rapidly.

 

[Compleks]

Is $198 per hour a reasonable fee?

My tax return was charged at 2.5 hours. I only have the one property, and I try to keep everything organised and present all the information necessary in a simple layout to save time/make it easier.

Thanks.

 

[Peter_Tersteeg]

I wouldn't say it's unreasonable, but my accountant charges a base rate per return, then has adds on extras depending on the number of properties, trusts, businesses, etc. It's all published in a schedule up front.