Head of Property Management
Head of Property Partnerships
How to maximise your tax depreciation deductions
Whether you're a seasoned investor or a first-time property owner, taking advantage of the often-overlooked deprecation tax benefits can potentially unlock significant savings. Read on to discover valuable tips that can put more money back into your pocket while staying fully compliant with tax regulations.
What is Tax Depreciation?
Tax depreciation is an allowance for fair wear and tear on any income-producing or investment property. Tax depreciation deductions reduce an investor’s assessable income allowing the owner to reduce the amount of taxation payable. The deduction is based on the depreciating value of the property asset.
An investor can claim two distinct types of depreciation on property:
1) Capital Allowance: This allowance applies to the structural elements of a building, including walls, floors, roofs, and other permanent fixtures. It also includes improvements made to existing structures, such as extensions or renovations.
2) Plant and Equipment: Typical items include air conditioners, blinds, carpets, curtains, door closers, hot water systems, ovens, and range hoods.
What is a Tax Depreciation Schedule?
A Tax Depreciation Schedule is a professional report prepared by a suitably qualified Quantity Surveyor which shows the amount of depreciation able to be claimed in the property over the life of the building.
The report will identify the total tax depreciation claim available to the property investor for each year from the date of purchase.
It is important that the report is undertaken by a qualified Quantity Surveyor and recognised Tax Depreciation Expert. A Quantity Surveyor should be able to answer all your detailed questions and will ensure that no items are missed, the maximum claim is made, and that the report complies with the ever-changing rules prescribed by the Australian Taxation Office.
Do I need a Tax Depreciation Schedule?
You need to get a tax depreciation schedule if:
1. The property commenced construction after the 16th of September 1987 OR
2. The property has been renovated or extended after 27/2/1992 by the previous or current owner with a value exceeding $40,000 OR
3. You bought the property brand new.
This article is based on information provided by MCG Quantity Surveyors, one of LongView’s accredited providers. MCG Quantity Surveyors is specialised in tax depreciation schedules for residential property investors. To talk to one of their tax depreciation experts, call 1300 795 170 or visit www.mcgqs.com.au.