05/02/2021
When you become a property investor, it is natural to run into the reduction of your asset’s value as the time passes by and your investment goes through wear and tear. The good news is that you’re entitled to full depreciation deductions and can claim it from The Australian Taxation Office.
CAPITAL WORKS DEDUCTIONS
This deduction has to do with the depreciation of the construction costs of the building and permanently fixed assets of the property, such as concrete and brickwork. If the property was constructed before 15th of September 1987, any construction renovations could be claimed as deductions.
PLANT AND EQUIPMENT DEDUCTIONS
This refers to items within the building like built-in appliances, hot water heaters, air conditioners, carpets, blinds, and any other fixtures and fittings that are outdated.
HOW TO CLAIM DEPRECIATION DEDUCTIONS
To claim depreciation on your investment property, you need to include a depreciation schedule in your tax return. This way, you can deduct depreciation from your pre-tax cash flow and maximise the return.
When you purchase your investment property, all assets within the property are not itemised by value. That’s why in order to claim any tax deductions, you will need to employ a qualified Quantity Surveyor to do a thorough inspection to identify what can be claimed and make valuations in order to create a depreciation schedule for you against two deduction categories.
This is the only way you can legitimately claim tax deductions for depreciation. If you purchase a brand-new property, preparing a depreciation schedule is much easier as the value of the items can be easily determined. If you have an older property though, things become more complicated, and that’s another reason why it is important to use a reliable professional.
By having a full report prepared for tax deductions, you can potentially save thousands and improve your cashflow. If you have any questions about your investment