Depreciation considerations

Frequently neglected by property investors, depreciation can mean the difference between a good and a great investment. The start of a new financial year is a great time to find out exactly what you can claim to ensure you make the most of your investment.


The good news is that claiming depreciation is not a particularly onerous process as long as you have done the planning.

Generally, there are two types of depreciation: ‘building’ and ‘plant and equipment’. However, it is plant and equipment depreciation that can have significant benefits for investors.

Depreciation for property investors is an on-paper expense, so other than the costs of working it out, you don’t pay anything.

When it comes to calculating depreciation costs, a schedule needs to be created to evaluate the expenditure involved in generating income. There are more than 1,500 items identified by the Australian Taxation Office (ATO) that property investors can claim, so it is important to seek professional advice when putting together your depreciation schedule.

For example, you purchase a one-bedroom unit as an investment property. In the first year of purchase your tax depreciation will be $9,000. The cumulative tax depreciation from years 1 to 5 will be approximately $40,000 (assuming the property is less than five years’ old). This is a large amount of money and it will help offset the expenses of the investment property and ultimately make it a better investment.

If you haven’t claimed depreciation on your investment property in the past, don’t worry. Currently, the ATO allows you to back-date your depreciation by two years from the issue of your Notice of Assessment.

So, whether you are planning to renovate your investment property this year or just give it a touch of paint, there’s often something you can claim as part of your depreciation schedule.

To ensure you get the best return on your investment, seek advice today and when in doubt, ask questions.

Depreciation considerations
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