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Claiming Depreciation on Investment Property

Claiming Depreciation on Investment Property

If you own a rental property, there is an easy way you can increase your return and improve your cash flow. It is called a property depreciation report.

Properties and the items inside it decline in value over time, so the Australian Taxation Office (ATO) allows property investors to claim the loss of value as a tax deduction against their taxable income every financial year. This is called property depreciation.

Generally, there are two types of allowances you can claim. The first is depreciation on Plant and Equipment. This refers to the items inside the property such as the oven, air-conditioners, carpets, curtains and more. The second is Building Allowance which refers to the cost of constructing the building itself including materials, garage, driveways, brickwork and more.  

Claiming depreciation on an investment property

To claim depreciation on an investment property you will need a tax depreciation schedule. A tax depreciation schedule is a comprehensive report usually prepared by a specialist Quantity Surveyor that outlines all depreciation deductions claimable for a residential investment property. The quantity surveyor will separate the Plant and Equipment from the Building Allowance because the two have different rates of depreciation.

Even if your property has been renovated, it’s still possible to claim depreciation as long as you can provide evidence of how much you spent on renovations. After doing the property depreciation report, your accountant will then organise your tax return.

How much depreciation can you claim?

The amount you can claim will vary depending on the type of property, its age, and many other factors. You can use a depreciation calculator to get an estimate of how much you can claim.

If your property was built after July 1985, you’re eligible to claim both Plant & Equipment and Building allowances. But if your property was built before July 1985, you may only be allowed to claim Plant & Equipment allowance.

Many property investors are unaware that they can claim depreciation allowances on their rental property. Make sure that you do your research so you can get everything that you are entitled to.

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