Some facts you need to know about claiming depreciation on your property
By | 3rd Apr 18

Are you a first time investor or unsure about what tax depreciation actually is? It’s a topic of discussion that has increasingly been growing as more people start to use property as an investment opportunity.

Tax Depreciation is typically one of the largest deductions for investors. For example, you can typically average between $6,000 to $12,000 of deductions in the first year for a standard modern residential property.

Essentially these deductions and all the typical expenses incurred when you own your investment property (fees, rate, property management fees, and maintenance) can be claimed against your personal taxable income for the year.

What does a Tax depreciation Schedule typically include?

  • Individually itemised asset values
  • Identification and separation of staged capital works and improvements;
  • 40 years of forecasted deductions;
  • Reporting of both diminishing value and prime-cost methods of depreciation,
  • Pooling of low-cost and low-value assets to speed up depreciation claims in the earlier years
  • Inclusion of immediate write-off assets

New legislations – what you need to know and how you may be affected.

The last major change to depreciation legislation was in the mid 1980s, so it is important to understand how the new changes may affect you.  The great news is investors who purchased their properties prior to 7:30pm on the 9th of May 2017 are unaffected by the new regulations.

The main legislation change will affect those who have purchased an older or second hand property post this 7:30pm on the 9th of May 2017. If you have purchased a second hand property post this date, you will not be able to claim depreciation on existing plant and equipment assets. Any additional assets added to the property however can be depreciated as normal.

What is plant and equipment?

Items or assets that are easily removable within an investment property ie: air conditioners, smoke alarms, garbage bins, blind or curtains

If you have purchased a new property, you can claim depreciation as per usual as new properties are not affected by the new legislation.

It is important that you employ a professional in this field as the ATO only recognises qualified schedules by quantity surveyors. For more information on how you can create a property investment portfolio, get in touch with our friendly team today! Email us here.