Claim depreciation deductions this financial year

Depreciation deductions can make a big difference to an investment property owner’s cash flow.

The Australian Taxation Office allows owners of income producing properties to claim depreciation, or the decline in value of the building structure and the easily removable plant and equipment assets contained, as a deduction. Depreciation is considered a non-cash deduction, meaning an investor doesn’t need to spend any money to be eligible to make a claim. Therefore, it’s not unusual for these deductions to get missed.

With tax time approaching, investment property owners should ensure they claim all the deductions they are entitled to.

Depreciation deductions relating to the building’s structure can be claimed as a capital works (division 43). 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.

Plant and equipment assets* are the easily removable fixtures and fittings within the building. Examples include items such as hot water systems, carpets and blinds. Depreciation can be claimed on these assets in most scenarios.

*In November 2017, changes were passed to depreciation legislation relating to previously used second-hand plant and equipment assets found within residential investment properties where contracts are exchanged after 7:30pm on the 9th of May 2017. Owners of such assets are no longer eligible to claim depreciation on these items. However, the rules were grandfathered, meaning those who exchanged contracts prior to this date are not affected. Affected owners can still claim plant and equipment depreciation for any assets they purchase and install in the property themselves. These rules also don’t affect residential properties considered to be substantially renovated, non-residential/commercial properties and deductions that arise in the course of carrying on a business.    

Investors should engage a specialist Quantity Surveyor such as BMT Tax Depreciation to discuss the depreciation potential of any investment property they own or are planning to purchase.

BMT can provide a free estimate of the first year deductions available based on the scenario of the individual investor and can provide a comprehensive depreciation schedule outlining the deductions they are eligible to claim when the visit their Accountant to perform their annual income tax return.

A depreciation schedule has a one-off cost which lasts the life of the property (forty years) and will ensure the owner claims their depreciation entitlements correctly. A depreciation schedule is 100 per cent tax deductible. By ordering the schedule prior to the 30th of June 2017, an investor will be able to claim the fee straight back in that financial year.

Regardless of when a residential property is purchased there are likely to be substantial deductions available. It is still worth discussing every property scenario with BMT.

For more information, speak with one of the expert team at BMT Tax Depreciation on
1300 728 726 or call in at your local TaxAssist Accountants.

Article provided by BMT Tax Depreciation.

Date published 15 Nov 2019

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.