Unclaimed property depreciation

[manicmoo]

I've been renting a fairly new property in Bunbury (WA) for the past seven years - since 2005. The house was around five years old when it was first rented. The problem is that I never claimed, in tax, the depreciation costs associated with the house, and plant. I am lead to believe by my accountant that amendments to income tax claims can only be made for the past two years. That means possibly will miss out on five years of tax depreciation claims.

Does anyone have a similar experience dealing with this?

Thanks in advance.

 

[Aaron_C]

True but let's not forget that claiming depreciation on the property effectively increases the amount of capital gains tax you pay if/when you sell. So it's not an automatic thing to do.

 

[depreciator]

Amending two years of tax returns is easy. It used to be easy to go back four years, but this was changed recently. It is possible to go back further, but I believe the accountant needs to contact the ATO first and get their agreement. The ATO aren't all that happy to facilitate this because nobody ever seeks to amend a tax return if they think they might owe the ATO money.

Scott

 

[HotRod]

True but let's not forget that claiming depreciation on the property effectively increases the amount of capital gains tax you pay if/when you sell. So it's not an automatic thing to do.

IIRC, even if you don't claim the depreciation during the time you rent out the property the amount you should have claimed still comes off the cost base when you sell. So better to claim it now and pay less tax, or you'll get hit at the end and pay more tax for nothing.

Someone can correct me if I'm wrong, but that was my understanding.

 

[depreciator]

That was changed a few years ago, Rod. It was always pretty dopey and I would be willing to bet it was never once enforced. Goodness knows how someone who sold a property, say, a year before they did their CGT calcs could work out the eligible building depreciation.

 

[Burramys]

My understanding is that once depreciation is claimed it must continue, and that even if it isn’t claimed in a FY the depreciation still comes off the tax base. There appears to little latitude in this area, with most expenditure deductions mandatorily applied in the FY in which they’re incurred. For example, you can’t elect to not claim council rates and add those rates to the cost base.