Property Depreciation Explained

By Domenic Belfiore

Is my property too old to benefit from property depreciation?

Owners of investment properties have the opportunity to claim a variety of expenses, one of which is property depreciation.

A common query for investors is when it is worth claiming property depreciation. Managing Director of BMT Tax Depreciation Bradley Beer, has told us that statistics suggest as many as 80 per cent of property investors are failing to take advantage of property depreciation. This can result in potentially thousands of dollars of missed savings.

“Property investors often assume they are ineligible or that it is not worthwhile to claim depreciation because they believe their property is too old or that they have not owned the property for long enough. The reality is it is worthwhile making a claim on any property.” says Bradley.

“Requesting a tax depreciation schedule which outlines what claims are available for a property owner can be the difference between turning a negative cash flow investment into a positively geared asset. On average, most property investors can claim between $5,000 and $10,000 in deductions in the first year for any residential property investment,” said Bradley.

This is no small amount, so for an investor wondering what property depreciation is and how to go about making a claim, we’ll explain.

  1. Depreciation is a non-cash deduction The Australian Taxation Office (ATO) allows the owner of an investment property to claim a deduction for due to the wear and tear of a building structure and its fixtures over time. It is described as a non-cash deduction because the investor does not need to spend any money to be able to claim it.
  2. Property depreciation can be claimed in two ways; via capital works deductions for the decline in the building structure, and for the depreciation of plant and equipment items. Though the ATO restricts capital allowance depreciation claims based on the construction date of the property, property owners of all property types will receive significant deductions for claims on the fixtures and fittings contained within the property.
  3. Legislation states that for any residential property in which construction commenced prior to the 18th of July 1985, the owner will not be able to claim capital works deductions.
  4. For commercial buildings, this date is the 20th of July 1982.
  5. There are no date restrictions for a claim for the depreciation of eligible plant and equipment items contained within the property. The amount of depreciation available as a claim for these items is dependent on the condition and quality of these items and is measured based on their individual effective lives as set by the ATO.

For the owners of investment properties who have not previously made a depreciation claim, the previous two years tax returns can usually be adjusted to recoup lost claims.

It is recommended for all property investors to contact a specialist Quantity Surveyor, such as BMT Tax Depreciation, to arrange a tax depreciation schedule. Quantity Surveyors are one of the few professions qualified by the ATO to have the skills necessary to estimate construction costs for depreciation purposes. We recommend BMT Tax Depreciation as they have been completing tax depreciation schedules for over 15 years, and aim to ensure investors are maximising their returns from an investment property.

To find out more on how you can maximise your return on your investment property, whether it be a single property or an entire portfolio contact Samantha Newton from Ray White Craigieburn on

03 9308 2277 / 0434 524 883 email

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