Can You Amend Your Tax Return to Include Missed Depreciation Deductions?

If you've missed claiming tax depreciation on your property investments, don’t worry—you're not alone. Many property investors overlook this essential deduction, often leaving thousands of dollars on the table. The good news? The Australian Tax Office (ATO) allows you to amend previous tax returns and claim unclaimed depreciation deductions. Here's how it works and why it’s worth exploring.

Why Tax Depreciation is Essential

Tax depreciation is a non-cash deduction that allows you to claim for the wear and tear on your investment property, including structural components (Division 43) and plant and equipment assets (Division 40). This deduction can significantly reduce your taxable income, freeing up cash for reinvestment or other expenses.

Can You Claim Missed Depreciation?

Yes, you can! The ATO allows you to amend tax returns from up to two years ago for individuals and small businesses (and up to four years for larger taxpayers). This means you can recapture missed deductions and boost your refund for previous years.

How to Amend Your Tax Return

Here’s a step-by-step process to get those missed deductions back:

1. Engage a Qualified Quantity Surveyor
   First, you’ll need a tax depreciation schedule prepared by a qualified Quantity Surveyor, like the team at Koste. This schedule outlines all eligible deductions, ensuring accuracy and compliance.

2. Contact Your Accountant
   Provide the depreciation schedule to your accountant, who can then amend your previous tax returns using the ATO’s online portal. Your accountant may also help determine whether the amendments are worth pursuing, depending on the value of missed deductions.

3. Lodge the Amendment
   Amendments are typically processed online, with a response from the ATO within 28 days. If approved, you’ll receive the refund directly into your account.

Example: Claiming Missed Depreciation

Case Study: $12,000 of Missed Deductions

Jessica purchased an investment property in 2021 but didn’t realise she could claim tax depreciation. In 2023, she consulted Koste to prepare a tax depreciation schedule, which revealed $12,000 in missed deductions for the previous two years.
By amending her tax returns, Jessica reduced her taxable income by $6,000 per year. This resulted in a refund of $4,200, based on her marginal tax rate of 35%.

Is It Worth Amending Your Tax Return?

While the process is straightforward, consider the following:

• Timeframe: Ensure you’re within the two- or four-year amendment window.
• Cost vs. Benefit: If the missed deductions are minimal, the cost of amending your tax return may outweigh the benefit.

At Koste, we provide a no-obligation assessment to estimate your unclaimed depreciation, so you know whether it’s worth pursuing.

Proactive Tips to Avoid Missing Deductions

1. Get a Tax Depreciation Schedule Early
   Always obtain a tax depreciation schedule soon after purchasing an investment property.
2. Review Tax Legislation Annually
   Legislation changes, such as the 2017 Budget updates, may affect your eligibility to claim certain deductions.
3. Update Your Schedule Regularly
   Renovations, replacements, or new assets? Update your depreciation schedule to maximise your deductions.

Don’t Leave Money on the Table

If you suspect you’ve missed claiming tax depreciation, it’s not too late to act. With the help of a qualified Quantity Surveyor and your accountant, you can amend your tax returns and potentially secure a significant refund.

Contact Koste today to get started on your tax depreciation schedule and maximise the potential of your investment property!