Tuan Duong: Yup, more than welcome.
Paul Glossop: Again, we’re trying to make sure in these educational series that we are trying to provide on-going to our clients is and interested viewers in general trying to better their understanding of the investment property space. Everything from buying the right asset to making sure your structures are right, getting your mortgages in place. One part that I think probably was less touched on which is still vital and it’s just another aspect of what I think, making a proper professional investor holistic is depreciation and understanding how to maximize your cash flow in any property you purchase. Now, that flow is all too familiar, we see a lot of our clients come through our doors who may have already bought one, two, three properties in the past and have owned those for a number of years. And when we start talking and when I personally start talking, or any of our team start talking about depreciation, they raise their eyebrows and I can see pretty quickly that they probably haven’t really considered it for their previous properties, and all of the sudden the question comes is “Well, I bought that property kind of a while back, can I still claim anything on that?” So, I probably pose the question to you being, the qualified person to answer that mate, but if I got an existing property that I bought a few years ago, can I claim anything on it?
Tuan Duong: I guess, that’s a really good question Paul. And at this point and time, if you bought a property a few years ago, then you wouldn’t have been affected by the budget. And essentially, if you bought or purchased your property pre-9th of May 2017, all the rulings around that wouldn’t apply and as such, you can claim depreciation on the building allowance as well as well as plant and equipment. So, regardless of the age of the building, whether it was built in the 1960s or 150 years old, if their residual assets, being plant equipment like your carpets and your ceiling fans are still actively working, then they have some residual value that you could claim, so there is on doubt about it, there’s depreciation on it. On the other point is that building is something that you own for quite a few years, the ATO does understand that people can miss these things in their tax deductions or tax returns, so what ultimately the ATO provides is a two-year rule for personal individual tax returns, and that allows the investor to go back, which is a non-business residential property investor, wind back their tax return and look at how much depreciation was available in those respective years, and there is a cutoff. So it is two years from the date of notice of assessment from when their tax return was lodged, they’ve got a two-year window to amend or change any update their tax deduction and input those claims, and that is where they could get a quantity surveyor. We then pinpoint an exact time frame of when they bought it and when they settle on the property, and itemize exactly those assets that were depreciable then and workout if those respective years that they were within those windows can claim that depreciation within that. Most oftenly than that, some clients with two or three properties, they’re looking at 20,000- 30,000 dollars’ worth of tax deductions and they are very thrilled with the outcome.
Paul Glossop: Absolutely, that is what I think a few people have say that all of their Christmas’s have come at once. But when it comes to not necessarily realising that, and going back two years and especially if you got multiple properties and you haven’t claimed anything on any of them. And then, even more importantly now, pre-May 9th 2017, where you are effectively got to claim plant equipment and also capital works on every property irrespective of age. There was a lot of opportunity in that space. And I think probably one thing that I always touch on, which a lot of seasoned investors probably would have already understood this, when the May 9th budget came down and talked about that cutoff date of pre-imposed 87, and probably more so looking at how and if you’re going to buy an investment down the track and if you’re looking at depreciation and cash flow as part of that parameter of why you’re buying that property. I think the flow on that now from what I see is probably a bit of a surrogate which may not have been considered too much is the fact that if for me for example own multiple properties that I already bought pre 2017 May 9th, I’m probably going to be a little bit reluctant to sell because I’ve got this cash cow that is going to be providing me with some deductions and I have made capital gains, which is great but I’ve also now, potentially not going to be selling these assets and I would potentially words with politicians, the fact that this might be a spin off that maybe wasn’t necessarily intended or understood. But it may actually put a golden handcuffs situation to say that, if I sell that asset, I also sell all of the tax deductions that go with that asset. So rather than me freeing up properties to go on the open market, I’m probably going to hold on to them longer now as well unfortunately, which is tough. You sort of ask, how do you make these policies? We’re not here to debate policy but you kind of… every cloud has a silver lining. And I think, I guess, probably more importantly for this segment really talking to any investors who have an existing property both pre May 9th, 2017, and haven’t claimed any depreciation on that.
Tuan Dong: Definitely a wise one.
Paul Glossop: Yeah, pick up the phone, dial a number of a quantity surveyor like Tuan in the bottom of your screen or anyone that you can talk to. Make sure you touch base with an accountant as well to make sure that everyone is understanding. If they haven’t actually advised you to get a depreciation schedule, I’d be giving them a kick in the butt as well to say, I probably should have got that information a little bit earlier because ultimately, hopefully, they’re going to be giving you the rev up you need to maximize that extra aspect of your investment property down the tracks so.
Again, you can contact Tuan as per here details at the bottom of the screen. You can contact us from a property related questions as well guys. And we’re happy to chat and we will know doubt catch up with you very soon.