Tax depreciation overview

By claiming the tax depreciation deduction, it can help improve cash flow and make investing in either residential or commercial property affordable.   

What is tax depreciation? 

Tax depreciation is an accounting term that refers to the ageing and wearing out of a building and included fixtures and assets.  The loss in value each financial year is claimable as a tax deduction.  It is one of the largest deductions claimable and can total thousands or hundreds-of-thousands.  

The tax depreciation deduction is applied against the property’s income like how other property expenses are applied eg. property management fees, interest, repairs and maintenance. 

However, unlike the deductions mentioned above you do not have to incur and expense to claim it.  A Quantity Surveyor calculates the depreciation deduction for property investors to claim for future financial years.  

Why should I claim? 

By claiming the depreciation deduction this can help reduce your income tax payable which means you pay less tax.  This puts more money into your pocket that you can either pay down debt with, save, or reinvest.   

Who can claim? 

Owners of income-producing residential investment properties such as brand-new or existing houses, units or apartments and granny flats.  Also, commercial property owners and leaseholders.  

What can you claim? 

Tax depreciation falls under two categories:  

  1. Division 40 Depreciation – Assets / Plant and Equipment 
  2. Division 43 Depreciation – Building / Construction / Capital Works

Every component of a qualifying investment property will fall into one of the depreciation categories above.  

Plant and equipment depreciation  

Division 40 – Plant and equipment is an individual asset or grouped assets within an income producing property that are easily removable, soft furnishings or electronic in nature.   Here are some examples: 

 Tax depreciation overview » tax depreciation overview

 

Division 40 assets are treated differently in a residential property to a commercial property.   

Residential properties can claim for brand new assets up front.  For existing qualifying assets a value will be assigned to offset the Capital Gains Tax when the owner sells the investment property.   

Commercial properties can claim for brand-new and second-hand assets up front.  There are also different depreciation rates for assets across different industries and is quite complex compared to a residential property. 

Capital works deductions  

Division 43 – Capital works is the buildings’ structural elements and the items within the property that are deemed irremovable.  Here are some examples: 

Tax depreciation overview » tax depreciation overview 

 

Division 43 depreciation rates vary depending on the exact construction date of the building, and the use or type of property being depreciated.  

How do I claim depreciation?   

You can claim depreciation and save thousands in 3 easy steps! 

Step 1 – Order your depreciation schedule 

Provide some details over the phone or complete our simple form, or and we can make a start on your depreciation schedule today! 

Step 2 – We’ll analyse and report your claimable depreciation 

We’ll arrange an inspection if required, conduct property searches, assign asset values, estimate construction costs, and turnaround your report within 10 business days. 

Step 3 – Use our report annually to claim your deductions! 

Simply take your depreciation report along to your accountant, or we can deliver it directly, and start improving your cash flow straight away! 

Property investor case study 

Our client Yuki purchased a brand-new four-bedroom house for $660,000 in April 2020. 

Yuki spoke to her Accountant who let her know the importance of a depreciation schedule. Yuki contacted Capital Claims Tax Depreciation.  

Yuki was entitled to claim in depreciation deductions: 

First year claim: $13,421 

Claimed over first 5 years: $52,034 

Over the life of the report: $284,553 

Get a Free Estimate or Quote 

Our free service offers property investors peace of mind when ordering a Capital Claims Tax Depreciation Schedule.   

Our experienced team will provide an estimate of depreciation deductions in the first full financial year plus a personalised quote.  

To access our free service either complete our simple online form or call and speak to one of our friendly team on 1300 922 220. 

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Depreciation Schedule.

We’ll include an estimate of your potential deductions, and if we can’t guarantee a strong result, we’ll let you know up front and there will be no cost to you.