Property depreciation deductions can make a big difference to a property owner’s cash flow.
The Australian Taxation Office (ATO) allows property owners to claim depreciation, or decline in value, as a deduction. As a non-cash deduction, depreciation is often missed. With tax time approaching, property owners should be sure they are claiming all the deductions to which they are entitled.
Owners of income-producing properties can claim depreciation deductions related to the building’s structure as well as the plant and equipment assets within the property.
Depreciation related to a building’s structure can be claimed via capital works deduction. As a general rule, residential homes in which construction commenced after the 15th of September 1987 and commercial properties in which construction commenced after 20th July 1982 are eligible for the capital works deductions.
Depreciation on each plant and equipment item, or fixtures and fittings within a building can also be claimed. These items include hot water systems, carpets and blinds.
Generally, newer properties with newer fixtures and more expensive construction costs will attract more 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 inquiring about the possible depreciation deductions available on an investment property.
To maximize depreciation deductions, property investors should engage a specialized Quantity Surveyor to complete a tax depreciation schedule. The schedule has a one-off cost which lasts the life of the property and will ensure the property owner claims their deduction entitlements. The fee for a tax depreciation schedule is a 100 percent tax deductible.