What is depreciation and how does it work?

Depreciation is the natural wear and tear of a property and assets over time. While all properties and assets depreciate, depreciation can only be claimed as a tax deduction if the property is income-producing. This means only property investors, commercial owners and businesses can claim depreciation.

Depreciation is a tax deduction, so it reduces the owner’s taxable income meaning they pay less tax. Depreciation deductions have the potential to boost cash by thousands of dollars.

Q. What is a tax depreciation schedule?

This is the key to claiming depreciation. A tax depreciation schedule is a report that identifies all available depreciation deductions for the property. The schedule lasts a lifetime, and the preparation cost is 100 per cent tax deductible.

Q. Can investors claim depreciation on all types of property?

Most properties, both new and old, have depreciation available.

There are some myths out there that older properties can’t benefit from depreciation, but this isn’t always the case. While second-hand properties are impacted by 2017 legislation changes, the owner can still claim depreciation on new assets and any eligible capital works.

Q. Why does an investor need to consult with a specialist quantity surveyor? Doesn’t an accountant look after things like this?

A specialist quantity surveyor, such as BMT, prepares the tax depreciation schedule that an accountant uses to determine depreciation deductions.

Consulting with both a specialist quantity surveyor and an accountant will help make an investment strategy bulletproof.

Q. What’s the difference between a repair and an improvement?

An improvement enhances something beyond its original state, such as replacing a wooden fence with new Colorbond steel fencing. A repair’s purpose is to fix something, for example patching a hole in a wall or repairing pipes.

There’s also a big difference between the two when it comes to claiming them. Improvements must be depreciated using either capital works deductions or as plant and equipment. Meanwhile, repairs or maintenance can be claimed as a full expense in the year it was paid.

Q. What areas does BMT Tax Depreciation cover?

BMT offers an Australian-wide service, so no matter if the property is in Sydney or Alice Springs, the team can prepare a tax depreciation schedule. Their specialist site inspection team inspects all types of properties in the schedule preparation process to ensure all deductions are identified.

The team is dedicated to helping as many investors as possible. To learn more, contact the team on 1300 728 726 or Request a Quote.

BMT Tax Depreciation is Australia’s leading supplier of residential and commercial tax depreciation schedules.

Bradley Beer (B. Con. Mgt, AAIQS, MRICS, AVAA) is the Chief Executive Officer of BMT Tax Depreciation. Please contact 1300 728 726 or visit bmtqs.com.au for Australia-wide service.

Date published 16 Mar 2021

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.