Take Advantage of Depreciation

As a property investor, one area to boost cash flow is by claiming for depreciation on your property. Many people don’t claim for property depreciation because they are unaware of what they are allowed to do or don’t realise how much money they are missing out on by failing to claim.

Whilst more depreciation can be claimed on new investment homes, you can also claim depreciation on renovated properties. Depreciation allows an owner to claim a deduction for the asset as it ‘depreciates’ due to every day wear and tear. Property investors are entitled to claim depreciation on both the building materials used to construct the property, as well as its individual fixtures. The deductions arise from depreciation on the building, and a claimable allowance on capital works.
Some items that appear under the mantle of capital works include fittings and fixtures such as:

  • Hot water heaters
  • Dishwashers
  • Floor coverings
  • Curtains, Lights
  • Bathroom accessories
  • Cooking equipment
  • Clothes dryers
  • Plus many more

The amount you can claim each year depends on the ‘effective life’ of each item, which is determined by the Australian Tax Office.

So who can help determine what amount of depreciation applies to my property? A qualified Quantity Surveyor must inspect your home and prepare a report for your accountant. The reason for this is that Quantity Surveyors have expertise in the valuation of construction costs.

It’s encouraged to always check that the Quantity Surveyor is registered with ATO accreditation. From here, a depreciation schedule is determined, which also takes into account the construction date of the property. With apartments, you can also ask the owners corporation manager or you can check when the block was registered as strata title to determine the construction date.

Depreciation is not only a legal way to minimise taxation, but you might also discover thousands of dollars in tax deductions available on your investment.
We recommend that you consult your professional financial adviser or accountant and also refer to www.ato.gov.au for more information on depreciation. Information for this article was sourced from the Australian Tax Department.

Source: www.ato.gov.au