Property depreciation offers a valuable tax advantage for investors. It refers to the gradual wear and tear of a property’s structure and its assets over time. To account for this, the Australian Taxation Office (ATO) allows investors to claim depreciation as a tax deduction, which helps reduce taxable income and boost overall returns.
Understanding Property Depreciation
There are two key types of depreciation: capital works deductions and plant and equipment deductions. Capital works relate to the structural elements of a property—such as walls, floors, and roofs—and typically apply to buildings constructed after 1987. Plant and equipment deductions apply to removable items like dishwashers, air conditioning units, or carpets. Both types enable investors to recover part of the cost associated with property ownership.
Claiming Depreciation Deductions
To claim depreciation correctly, investors must identify which parts of their property are eligible and follow the ATO’s specific requirements. Given the complexity involved, many investors opt to consult a specialist to make sure they’re maximising their deductions and not overlooking any claimable items.
Why a Professional Depreciation Schedule Helps
A depreciation schedule, created by a qualified quantity surveyor, is a comprehensive report detailing all depreciable assets and their values. This document simplifies tax time, helping investors make accurate claims while staying in line with ATO regulations.
Over time, claiming depreciation can lead to significant savings—enabling investors to hold onto more of their rental income and increase the profitability of their investment properties.
These articles are general in nature and are not financial or legal advice. Please consult your professional financial and legal advisors before making any decisions.
