By now you might already know that you can deduct expenses from your rental income but do you know which ones are available to you?
Some of the expenses you can deduct from your rental income are insurance premiums, agent and professional fees, repairs and maintenance and depreciation on capital expenses.
Depreciation is a really good way to keep money in your pocket, as you don’t really shell out money for this – it just comes with the assets. However, you can only claim depreciation on assets kept in your business for more than one year and not all assets depreciate. These capital expenses or capital assets don’t include land, trading stock, franchise fees, and intangible assets such as goodwill.
Currently, you can claim depreciation for assets costing less than $1,000. If you have low value assets, you can group them together to depreciate as a pool but once done, they cannot be taken out of the pool. Pooled assets depreciate using the diminishing value method and must use the lowest depreciation rate among all included assets. Buildings can’t be part of a pool.
For those registered for GST, you claim depreciation on the asset price less the GST. For those that are not, you claim it on the total price of the asset, including GST. Depreciation rates vary for different assets based on the useful life and cost of the asset.
Depreciation was not allowed on most buildings but from 2021, depreciation deductions are allowed for non-residential buildings again. You can claim depreciation through the diminishing value method that depreciates at a higher rate with a reducing rate each year, or the straight line method with the same depreciation rate each year. Ask your accountant how you can work out your depreciation but the total depreciation you can claim is the same for both methods. You can even change methods along the way.
Our Business Clients
Cam recently caught up with Grant Douglas, owner of Makers Fabrication, to get his perspective on a few things. If you want to chew the fat with Grant further – get in touch and we’ll set it up.
Besides being pretty all-round top blokes, Matt and AJ are bloody screwed on when it comes to growing their business and smashing their goals.
Flick us an email or give us a buzz!
Outside Accounting
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Mail: PO Box 24-457, Wellington 6142
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