The Australian Taxation Office (ATO) allows property owners to claim depreciation on the structure as well as the plant and equipment assets contained within any income producing property. Depreciation related to a building’s structure can be claimed via a capital works deduction while plant and equipment assets are deducted based on an individual effective life set by the ATO.
As a general rule, residential properties in which construction commenced after the 15th of September 1987 and commercial properties in which construction commenced after 20th July 1982 are eligible for capital works deductions.
Deductions for plant and equipment assets are not limited by age, rather the condition and quality of each individual asset. Examples of depreciable plant and equipment items include hot water systems, carpets, blinds, smoke alarms, garbage bins, ovens and air conditioners.
Generally, newer properties with newer fixtures and more expensive construction costs will attract greater depreciation deductions simply because they have not depreciated in value as much as older properties. However, older properties still attract depreciation. It is always worth enquiring about the possible depreciation deductions available on a current or potential investment property.
On average, BMT Tax Depreciation finds between $5,000 and $10,000 in depreciation deductions in the first full year alone for their clients. By claiming depreciation, investors can improve their available cash flow and put thousands of dollars back in their pockets.
As a non-cash deduction, depreciation is often missed. To ensure depreciation is maximised, investors should contact a specialist Quantity Surveyor and obtain a tax depreciation schedule for their investment property.
The schedule will show deductions for the life of the property (forty years) and will ensure the property owner claims all of their depreciation entitlements. The fee for a tax depreciation schedule is 100 per cent tax deductible.
There are many providers that can complete a depreciation schedule for you and if you’re interested you can make an enquiry regarding the estimated deductions for an investment property by contacting BMT Tax Depreciation expert staff on 1300 728 726.