A Guide to Property Depreciation

Research shows that 80 per cent of property investors fail to take advantage of property depreciation deductions. Most commercial and residential property owners are unaware that there are tax deductions that can be claimed on property depreciation.

According to the Australian Tax Office (ATO), property owners can claim depreciation on their income-producing property due to wear and tear that occurs in the plant and equipment and the building’s structure.


In this property deprecation guide, we’ll provide some essential information to help you understand and take advantage of depreciation.


Depreciation Schedule

With a depreciation schedule, you can pay a lesser amount of tax. The amount that you claim will reduce your taxable income. Depreciation is called a non-cash deduction because you don’t have to pay for it on an ongoing basis. All the deductions are built into your property’s purchase price.


Your Property may not be too old to Claim Depreciation

For residential properties built after 1987, the Australian Tax Office (ATO) allows depreciation to be claimed on the building structure like the bricks, concrete and windows, etc. But, if your property was built before this date, you won’t be able to claim depreciation on the building structure. For industrial and commercial properties, the dates for claim vary. A Professional Quantity Surveyor can provide you with details about varying cut off dates of industrial and commercial properties.


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Your Property will be Inspected

In order to satisfy the requirements of ATO, your property will be inspected by a Quantity Surveyor. He/she will note down and photograph all the items that are depreciable. This will ensure that you don’t miss out on deductions. This documentation will then be used as evidence for audit.

You Can Claim on Renovated Property

You can claim deductions on your renovated property, but you will need to provide the amount that was spent on all the renovations. You are entitled to depreciation even if the renovations were completed by the previous owner. If the amount spent in the renovation is unknown, ATO stipulates that a Quantity Surveyor should make the estimation of how much was spent in the renovation.


If your residential property was built after 1985 your accountant is not allowed to estimate the construction costs.


Cost of Depreciation Schedule

Some property owners are concerned about how much it costs to prepare a tax depreciation schedule. The cost actually varies according to the location, size, type of the property and several other factors.


The Amount You’ll Save

You may be concerned about how much you’ll be able to save from claiming deductions on your property. The amount varies since each property is different and there are several factors that can affect the claim on depreciation. Try a depreciation calculator for a free property depreciation estimate.


The Time It Takes to Complete the Schedule

Generally, it takes about 2 to 3 weeks to complete the property depreciation schedule provided that your property is inspected by the Quantity Surveyor without delay.


 For Property Bought 3 Years Ago

You can claim the deductions on your property even if it was bought three years ago. But, there a few exceptions, so contact us for clarification. If you need assistance in claiming deductions on your property, contact Josh Financial Services.

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