There are many property related tax deductions that investors claim including, council and water rates, property management fees and repairs. However, one claim that is often not considered is depreciation.
Think of it as compensation for wear and tear. Buildings suffer wear and tear, and so do their contents. If you are renting out a property, you can claim this as a tax deduction.
To claim depreciation, you need a Quantity Surveyor to put together a document called a Depreciation Schedule. It sets out how much you can claim every year as a deduction.
Depending on when your property was built, the Quantity Surveyor will estimate the construction cost at the time it was built and they will put a value on it. You will claim this at 2.5% per year.
You can even claim depreciation on renovations done by a previous owner.
If you bought the property before May 9, 2017, you will also be able to claim depreciation on the assets. This includes things like appliances, carpet and air conditioning that were in the property when you purchased it. However, if you purchase a property after May 9 2017, restrictions on asset depreciation claims will apply. You will only be permitted to claim on assets that you have purchased yourself and not those purchased by previous owners of the property.
On a recently built property, the tax deduction for depreciation can easily be around $8,000 per year, so in many cases it could be an investor’s biggest property related tax deduction.
If you are a property investor and would like to know more about depreciation schedules, please contact your accountant, advisor or financial planner. To organise a Quantity Surveyor to put together a Depreciation Schedule for your investment property, contact Depreciator or another Tax Depreciation Specialist. Mention that you are a client of McConachie Stedman and a discount may apply.
*This article is based on information provided by Depreciator.