A Guide to Claiming Your Tax Depreciation

All forms of income earning properties comprise of significant taxation benefits available to be enjoyed as tax credit. The sad news is that many property investors in Australia aren't taking full advantage of the tax depreciation deductions that they are entitled to. Both brand new and existing properties do accrue some depreciation benefit that property owners can claim on the premise of a tax credit. The solution is for property investors to get a tax or property depreciation schedule prepared by a quantity surveyor to enable them claim those deductions.

What is a tax depreciation schedule?

The same way you can claim wear and tear on a vehicle bought for income earning purposes, you may also claim property depreciation against your tax income. Basically, property depreciation and tax depreciation on an investment property is a genuine reduction against quantifiable taxable income allowing you to reduce the amount of taxes payable to the tax authorities.

What makes up a tax depreciation schedule?

There are two main depreciation allowances which property investors can claim. They include capital works allowance, and plant and equipment depreciation. 

Capital works allowance is simply a deduction for the structural facet of the property including permanent irremovable expenses. This is usually known as the building write-off. Capital allowance deductions are determined on the basis of the historical fee of the structure. Based on the age of your property, an investor can claim up to four percent of its past construction cost.

Plant and equipment depreciation is a deduction for removable assets which basically depreciate a lot faster than the building itself according to the Australian Taxation Office. Every plant and equipment features an effective life and the deduction available on that component is worked out accordingly. Majority of plant and equipment assets contained inside a property can be depreciated over their effective natural life. A number of these products include:

  • Ceiling fans
  • Carpet
  • Hot water service
  • Dishwasher
  • Blinds
  • Washing machines
  • Exhaust fans
  • Ovens
  • Air conditioners
  • Smoke alarms
  • Furniture package
  • Security systems
  • Curtains

If you are among those property owners who have not been claiming their tax depreciation deductions, note that former financial years' tax file returns may be modified. According to the Australian Taxation Office, you can amend your returns up to the last two years.

To maximize on a depreciation claim, it is crucial to have proper construction costing abilities and experience, coupled with a vast understanding of the Australian tax assessment act on the part of the quantity surveyor.