How to successfully claim depreciation on your properties overseas

From Berwick, Broken Hill and Bathurst to Belgium, Brazil and the Bahamas, claiming depreciation on your properties overseas is a lot easier than it once was.

With the world getting smaller and real estate markets around the globe being far more accessible, have you thought of buying real estate abroad? Or maybe you have migrated to Australia and still own property  outside  of the country?

FAST FACT: Did you know the ATO treats investment properties outside Australia similarly to a property that is owned within Australia?

Expenses paid on an overseas investment property, such as agent fees, insurances, repairs and maintenance costs, rates and taxes, are an allowable deduction similar to paying these expenses within Australia.

Claiming depreciation is the same.

The construction cost of these properties needs to be established along with any improvements that have been completed to the property  since  construction.  The construction cost and any improvements to these properties can be depreciated, subsequently reducing the amount of tax you pay.

It’s important to note that to qualify for depreciation the building needs to have been constructed after August 22, 1990.

Construction cost varies greatly across the world and this cost needs to be a correct reflection from the country of origin. For this reason Australian building rates are not used for construction outside of Australia.  Once the original  construction cost has been established it will be converted into Australian currency as prescribed by the ATO.

All fixtures and fittings (including carpet, curtains, cooktops, heaters  and so on) are the same and must be valued at the time of the purchase and depreciated according to the ATO’s guidelines.

It’s important to note that Australian resident individuals, who hold a temporary residency visa, are generally exempt from paying tax on rental income received. Therefore, these possible deductions are not available.

Just like in Australia, overseas investment properties start depreciating from the date your property starts to produce an income. However, you can only claim tax deductions from the time you start paying tax within Australia and this will need to be considered when preparing your depreciation schedule.

The association with the ATO and the equivalent in another country is very complex and specific, and it’s advisable you get advice regarding the taxation implications associated with investing overseas.