Property investors are entitled to several taxation benefits however many fail to take full advantage
of the depreciation deductions available to them.
While most investors are aware of claims for expenses such as interest on their loans, council rates,
property management fees and repairs and maintenance costs, depreciation is a hidden factor often
To help you better understand property depreciation, here are the answers to some of the most
frequently asked questions.
What is property depreciation?
As a building gets older, its structure and the assets contained within it wear
out – they depreciate. The Australian Taxation Office (ATO) allows owners of income producing
properties to claim this depreciation as a tax deduction.
What can you claim?
Depreciation deductions are split into two distinct categories:
- Division 43 capital works allowance
- Division 40 plant and equipment depreciation
The capital works allowance relates to claims for the wear and tear that occurs to the structure of
the property and any fixed items. Capital works includes items like the roof, walls, doors, kitchen
cupboards, bathroom tubs and toilet bowls.
Generally, any residential building where construction commenced after the 15 th of September 1987
will entitle its owner to capital works deductions. These deductions can be claimed at a rate of 2.5
per cent per year for up to forty years.
Owners of buildings constructed prior to 1987 should still find out what deductions are available, as
often these buildings have undergone some form of renovation which can result in capital works
Plant and equipment depreciation can be claimed for the easily removable fixtures and fittings
found within the property. There are more than 6,000 different depreciable assets recognised by the
ATO, including items like carpet, blinds, air conditioners, hot water systems, smoke alarms and
ceiling fans. Each plant and equipment asset is assigned an individual effective life and depreciation
Under current legislation, owners of second-hand residential properties who exchanged contracts
after 7:30pm on 9th May 2017 cannot claim deductions for previously used plant or equipment assets.
Investors who purchase brand-new residential and substantially renovated properties,
commercial real estate or add new plant and equipment assets to a second-hand residential
property can still claim substantial depreciation deductions.
How will claiming depreciation help an investor?
As the owner of a residential investment property, claiming depreciation deductions can make a big
difference to your cash flow. During FY 2018/19, BMT Tax Depreciation found residential clients an
average first year claim of almost $9,000. A BMT Tax Depreciation Schedule covers all deductions
available over the lifetime of a property to ensure you maximise your cash flow and is 100 per cent
What is involved in completing a tax depreciation schedule?
BMT Tax Depreciation start by collecting the basic information needed to prepare the schedule.
This includes simple details like the name you would like to appear on your depreciation schedule,
the property address, purchase information and your property manager and accountant details.
Then, a property inspection is conducted. To make this as easy as possible, BMT can contact your
property manager or tenant directly to arrange access to the property. A property inspector will
count, measure and photograph all depreciable assets such as the flooring, light fittings, tapware
and other items. All the depreciable assets found within your property will be recorded during the
inspection and reported back to your local office.
From there, the depreciation and specialist tax team will review the information gathered and
prepare your tax depreciation schedule. BMT can even forward your schedule to your accountant
directly, saving you time.
Property investors who would like a quote on the deductions available in an income producing
property can Request a Quote or contact one of the expert staff at BMT on
1300 728 726.
Article provided by BMT Tax Depreciation.
Bradley Beer (B. Con. Mgt, AAIQS, MRICS, AVAA) is the Chief Executive Officer of BMT Tax Depreciation.
Please contact 1300 728 726 or visit www.bmtqs.com.au for an Australia-wide service.
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