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Tax Depreciation - Rental Property Depreciation Schedule

"Four out of five property investors do not realise they need to provide their accountant with a tax depreciation schedule for each investment or rental property. Without one, you are missing out on claiming thousands of dollars of depreciation deductions each year."
Liam Hannah - CEO (Quantity Surveyor) Property Returns

What is Property Tax Depreciation?

Property Tax Depreciation is a piece of Australian Tax Office Legislation that was introduced in 1985 to stimulate the construction industry and provide much needed rental accommodation for Australia's increasing population. The legislation provides large tax deductions for investors in the property rental market so that holding costs of the property asset are reduced significantly when a tax depreciation schedule is applied.

What it means for you is that just as you claim wear and tear on equipment or vehicles purchased to generate income, you can also claim the depreciation of your investment or rental property against your taxable income.

Claiming depreciation on your investment rental property is a perfectly legal way to reduce the tax burden of your income-producing investment property in its current year, and simply defer that tax to a later date.

Property Tax Depreciation reduces an investor's current year's income on their property. The depreciation claimed is added back to the cost basis of the property when it is sold. Since the majority of Australian investors are looking for a long- term commitment when purchasing property, depreciation claims will maximise your property's monthly cash flows and aid you to pay off your loan more quickly.

How much can I claim in deductions?

How much you can deduct through property tax depreciation depends on four factors:

1. Plant Assets are the value of the plant asset items bought with the property at settlement.
Plant assets are items that do not form an integral part of the building's structure.

2. Building Allowance, which applies to properties built after 1988, is what the historical cost was to build the original structural element of the property.

3. Pre-Purchase Renovations or Extensions is the historical cost of any improvements to the original structure of the property made by the previous owner.

4. Post-Purchase Expenditure is the cost of any expenditure by the owner after settlement

It's very important to note that you can claim substantial tax deductions on new, old, renovated, and shared properties, even those you have owned for many years and for which you have not claimed any depreciation.

Examples of claiming Tax Depreciation


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