What is Property Depreciation/Tax Depreciation?
Put simply, property tax depreciation refers to the annual wear and tear of a building and its fixtures. As a building ages it wears out, in accounting terms it depreciates in value. This loss in value can be claimed as an annual tax deduction by any tax payer who owns an income producing property – be it residential, commercial, industrial, health or educational. All property investors should have a tax depreciation report, prepared by a suitably qualified quantity surveyor in order to maximise their tax deductions and improve the cash flow position of their investments.
The main legislative reference for claiming depreciation is the Income Tax Assessment Act (1997). The act recognises the depreciation of income producing assets under the following two divisions:
Division 40: This division refers to plant and equipment articles such as carpets, blinds, air conditioners and kitchen appliances. The ATO publishes a list of items that should be included in this category, and we are in constant contact with the tax office to ensure that our reports are 100% compliant with the legislation. The best thing about division 40 plant and equipment, is that it can be claimed on any property REGARDLESS OF AGE! So even if your building was constructed more than 20 years ago, it is still eligible for a depreciation claim. For the property investor, this means more tax deductions, less tax payable, and therefore better cash flow returns on their investment.
Division 43: This division basically refers to the structural element of your investment property. It includes permanently fixed building works such as the foundations, frames and trusses, cladding, tiling, doors, joinery, and hard landscaping. Division 43 building works are written-off at rate of either 2.5% or 4.0% per annum depending on the building’s age and use. In order to claim division 43 building works, the building has to be constructed after 17 July 1985 (residential) and 20 July 1982 (non-residential). It is important to remember that even if your building does not qualify for the division 43 building write-off allowance, you can still make a claim on the division 40 plant and equipment assets.
Over the years we have helped thousands of property investors claim the maximum amount of property depreciation deductions available to them. In many cases we have helped people who had been misinformed about depreciation, and had been told it wasn’t worthwhile, or that the cost of a depreciation report would outweigh the tax benefits associated. We guarantee the value of our report: Claim at least double our fee in the first full year or the report is free!
Contact us today to see how we can literally save you thousands!
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