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TAX DEPRECIATION & PROPERTY INVESTMENT



Did you know every residential property investor should have a tax depreciation schedule to substantiate and claim maximum deductions?


The concept of tax depreciation for property investors can be complex, so we sat down with Tuan Duong, Principal at Duo Tax Quantity Surveyors to answer some of the frequently asked questions.


Learn about tax depreciation available for your investment property and start claiming.


Q: What is Property Tax Depreciation?


A: Depreciation is the loss in value of assets over a period of time. With property, as buildings get older, their physical structure and all assets internally also decreases in value because of wear and tear. This is known as property depreciation.


When it comes to your investment property, your assets are classified as either Plant and Equipment or Capital Works.


The wear and tear of either plant and equipment or capital works can be claimed as a property tax depreciation. The depreciation figures that you as an investor can claim as tax deductions each financial enabling you to increase your tax refund.


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Q: How do you calculate your depreciation?

A: To calculate your depreciation deduction, we apply general depreciation rules unless your asset is eligible for the instant asset-write off or simplified depreciation rules for small businesses.


The ATO prescribes two methods – prime cost method or diminishing value method. Both can be used to claim on your property depreciation.



Q: What is Capital Works (Division 43)?


A: Also referred to by the Australian Tax Office as Division 43, it is the items that make up the building and those that are fixed to the building.


Some of the items that you can depreciate as part of a residential investment property include:

  • Built-in wardrobes

  • Toilets and vanities

  • Basins and sink

  • Concrete slab

  • Retaining wall and fences

  • Timber framing



Q: Does my building qualify for (Division 43) capital works tax deductions?


A: Firstly you will need to ask yourself the following questions:

  • When was your building built?

  • What type of building do you own or lease?


Using these two key pieces of information, we can deduce approximately how much your brand new or second-hand property can claim on construction costs. Duo Tax have developed an easy guide to refer to check whether your property qualifies for Capital Works:




Q: In what scenarios are you eligible to claim property depreciation?


A: The eligibility criteria is as follows:



Q: When should you look to obtain a Depreciation Schedule?


A: We recommend obtaining arranging a Depreciation Schedule pre-settlement.



Q: Do I need a new Tax Depreciation Schedule every year?


A: Fortunately not, our tax depreciation schedules will last the full 40 years of depreciation (where applicable). So, you only need to purchase one for each investment property you own.


Looking to get your tax depreciation report?

Please contact Duo Tax to get a free quote, mentioning Meridian Australia in the enquiry box.





Tuan Duong - Principal at Duo Tax Quantity Surveyors


View Duo Tax Quantity Surveyors website

Follow Duo Tax Quantity Surveyors on LinkedIn


Disclaimer: When considering purchasing a property, it is always prudent to seek the advice of appropriately qualified professionals to determine which strategies are most appropriate for your circumstance.


References:

[1] What is Property Tax Depreciation?

[2] What is a Quantity Surveyor?

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Meridian Australia specialises in comprehensive residential property market research and analysis. Our meticulous approach to property investment is to guide our clients to make wise investment decisions.

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