C&G’s Guide to Tax Depreciation

Tips & Advice

Properties and their furnishings are inevitably impacted upon by natural wear and tear, which consequently decreases their value. Landlords may find it difficult to maintain competitive market rent when their asset is outdated, or even just a little worn around the edges.

Fortunately, the Australian Taxation Office (ATO) recognises the issue of wear and tear and allows landlords to claim tax depreciation against their assets. The depreciation scheme is often overlooked because of its non-cash nature, meaning that landlords don’t need to spend their money in order to make a claim. Many property investors self-assess and lodge their own tax returns, unwittingly excluding themselves from legitimate tax benefits. Word to the wise – consult with a tax expert to correctly determine depreciation rates, and your eligibility as a landlord. This blog from C&G breaks down tax depreciation with some basic ‘must-knows’ before the October 31 tax deadline arrives.

What is a tax depreciation schedule?

It features two components: capital works allowance and plant and equipment assets. The capital works allowance applies to both residential and commercial property and allows you to claim deductions on items permanently attached to the property. This includes doors, built-in cupboards, walls, roofs, and bathroom fixtures – in short, items that may require ongoing maintenance and repairs. Plant and equipment assets refer to items that can be removed from the property and which have a limited lifespan.  Plant and equipment includes air conditioning units and heaters, security systems, carpets and flooring, blinds and curtains.

How can I claim depreciation?

To claim depreciation, you will need to enlist the help of a quantity surveyor to produce the required schedule. This report is referred to when you prepare your tax return, as it lists the deductions available for both capital works and plant and equipment assets. These items vary depending on the type of asset (and even your industry if you own a commercial building). Having a depreciation schedule produced for your investment property is a savvy way of achieving the best tax refund possible.