What is tax depreciation?

Tax depreciation (also known as property depreciation) is a legitimate deduction against assessable taxable income, generated by a residential or commercial investment property.

It works by allowing property investors to deduct a portion of the original costs of plant and equipment (such as furniture and fittings) and capital works (such as renovations) on their investment property each financial year, over the effective life of that item.

The Australian Taxation Office recognises that the value of capital assets gradually reduces over time as they approach the end of their effective life. These assets can be written off as a tax deduction - known as depreciation.

What depreciation am I entitled?

If you own an investment property (new or old, large or small), two areas of depreciation are available:

  1. Plant and Equipment; and
  2. Capital Works on the Building.

Different items within a rental property have different rates of depreciation based on the effective life of the item.

Qualified inspectors, like the professionals at DEPPRO, have the expertise and knowledge to know which items are depreciable and how savings can be made.

To claim maximum tax benefits on an investment property the Australian Taxation Office (ATO) requires property investors to complete a fully compliant tax depreciation report.

As a member of the Australian Institute of Quantity Surveyors, DEPPRO is qualified to produce ATO-compliant reports.

For more information on asset depreciation and what you can and can't claim in your investment property see Assets & Depreciation. 

What is a property depreciation report?

A property depreciation report (also called a depreciation schedule) sets out all tax depreciation and building write-off claims for a new or existing investment property.

A DEPPRO property depreciation tax report provides a 40-year schedule for capital works allowance (building write-off) and depreciable assets (plant and equipment allowance) on an investment property, ensuring owners receive the maximum tax entitlements.

Based on your allowances, the report calculates the amount you can deduct each year as part of your tax return. 

What can tax depreciation do for investors?

Claiming tax depreciation allowances on an investment property increases its value by giving investors greater return on their investment.

Depreciation allowances combined with additional negative gearing factors such as interest on a mortgage, repairs and maintenance can help investors reduce their taxable income, pay less tax and improve cash flow.

The savings made can then be redirected to other areas, such as an investment mortgage or other debt reduction.

DEPPRO can help all owners achieve maximum tax benefits from their investment property, no matter the size or age.

If you have a property that you are using, or would like to use as a depreciation for tax, or for more information on how property depreciation can reduce your tax, please call 1300 888 489.