Are you claiming depreciation on your investment property?

June 03, 2015
Melinda Halloran

It’s that time of year when tax is on the mind. If you own an investment property, you could stand to make substantial savings on your tax by claiming property depreciation.

It is not uncommon for many property investors to overlook this tax benefit, simply because they aren’t aware that they can claim depreciation. In fact, LJ Hooker claims that 80% of property investors aren’t taking advantage of property depreciation.

By understanding property depreciation and how you can claim it, you can save come tax time. Here are the most common questions regarding property depreciation.

What is property depreciation?

Property depreciation is a deduction you can claim against your taxable income for the declining value of an investment property. You can claim deprecation on the building itself and its fittings and fixtures. This includes:

  • Hot water systems
  • Carpets
  • Blinds
  • Fixed appliances
  • Freestanding appliances and furniture
  • Light fittings

These deductions are offset against your tax claim, reducing how much tax you are required to pay. Unlike many deductions, property depreciation can be claimed without any further expenditure on your investment property.

Does depreciation apply to all investment properties?

Depreciation can be claimed on both new and old properties, but rates of depreciation vary depending on when the property was built.

If your property has been renovated, you can claim depreciation on this, even if the previous owner made the renovations.

There comes a point, however, when a building can no longer be depreciated and the ATO has set this at 40 years from the completion of construction. That means if you purchase a newly built property, you can make claims for up to 40 years.

How can I claim property depreciation?

When preparing your tax, your accountant will be able to handle the claim for you. It is recommended that you use a quantity surveyor to complete a tax depreciation schedule for you. This schedule contains information about the deductions available for your property, which will help your accountant when preparing your claim.

Using a quantity surveyor prevents you from underestimating your claim and saves you from paying tax penalties if you claim too much. The price of a surveyor is generally far less than the savings you stand to make on your tax.

When choosing a quantity surveyor, check whether they are accredited with the Australian Institute of Quantity Surveyors (AIQS).

I didn’t know about property depreciation – can I amend previous tax returns?

The answer to this question is yes. If you haven’t previously claimed depreciation on your investment property, you can speak with your accountant about amending past returns to claim the deductions.

Claiming property depreciation is one of many tax benefits that come from having an investment property. In addition to these tax benefits, investment properties can provide great returns.

If you would like to know more about property investment, contact me to discuss your finance options.

Luke Cashin
0419 733 862  
Your Garden City Mortgage Broker, Brisbane

Posted in: Property investment

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