It is widely understood that cars depreciate in value as they get older. Not only does the car’s structure and engine age and depreciate in value, the interior of the car also wears out with use. Items such as tyres are regularly updated to not only keep the vehicle safe but are an improvement to the vehicle.
Investment property tax depreciation is essentially the same thing. A property is like the car body and engine, it can attract the division 43 capital works allowance for the building structure. The interior of the car is like division 40 plant and equipment deductions and the new tyres are like a renovation that will usually attract both division 43 and division 40 deductions.
Obviously properties are different from cars, but the fundamental essence of depreciation remains the same. The depreciation on an investment property can of course provide a far bigger financial benefit to that of a car.
Any residential property constructed after 18 September 1987 is eligible for the 2.5 per cent capital works allowance. Additions and refurbishments within the Australian Taxation Office legislated dates may also be eligible for this deduction.
Over 6,000 plant and equipment items including blinds, stoves, lifts and hot water systems are able to be claimed by investors. Additionally, some items may be placed in a low-value pool and written off totally in the first year whilst others will depreciate over time.
Any building, irrespective of age, has a potential depreciation claim for the property investor to make. Old and new, big and small, it doesn’t matter, all income producing properties will attract a depreciation claim. The key is to maximise the available deductions on an investment property.
If you have overlooked making a claim for depreciation, or are worried you haven’t maximised your claim, you can amend the previous two years claims.
All investors want to maximise their return on investment. All types of income producing properties have depreciation deductions available. Considering the complex nature of what needs to be assessed, a Quantity Surveyor who specialises in investment property tax depreciation should be employed to complete any tax depreciation schedule for investors to ensure deductions are maximised.
Source: Article provided by BMT Tax Depreciation.