Depreciation Information for Investors

Property Investors can claim thousands of dollars in tax deductions on their Investment property based solely on depreciation on the property, and yet evidence suggests that the majority of investors are missing out on this easily claimed deduction.

Depreciation is an accounting method of allocating the cost of a tangible asset over it’s useful life span this includes building structure and plant and equipment assets of any income producing property.

Investors can end up saving a lot of money come tax time by including depreciation on your tax return as you do not need to spend any money on your property to claim these deductions.

Key trends

Based on data from BMT Quantity Surveyors, the vast majority of investors (over 83%) who arranged a depreciation schedule during the last financial year ordered a report for just one property. Just over 17% expanded their property portfolios to two properties, whist 3% had three or four properties and just under 2% owned five or more properties.

Another interested trend from this data showed that more than half of the properties that investors favoured were houses, with 42% opting for units, just 6% investing in townhouses and just under 2% choosing duplexes.


Average first year deductions

The amount you can claim as an investor varies hugely depending when a property was built, but the amount is still significant even if the property is classed as “old” – having been built pre-1987.

Brand new properties (built after March 2015) had an average first full year deduction of $12,680. 21% of investors claimed on these properties.

Investors owning fairly new properties (built between 2012 and 2015) claimed an average deduction of $12,316, and properties built between 2000 and 2012 could claim a deduction of $11,303 on average.

Houses built pre-2000 could claim an average deduction of $7,543 in the first full year, whilst investors owning “Old” houses (built pre-1987) still were able to claim an average deduction of $4,899.

22% of investors own an “Old” house – more so than invest in brand new properties (21%). The majority of investors (26%) claim on a house built between 2000 and 2012.

These values are averages and an accurate value can be determined by a specialist Quantity Surveyor.


Capital works deductions

An additional advantage of owning a newly constructed property is that owners can claim capital works deductions for the full 40 years, whereas owners of older properties can only claim capital works for the remaining 40 years after the construction date.

It is important to note that the ATO restricts capital works deductions based on the construction commencement date of the property, however plant and equipment assets are not restricted – instead being determined by the condition and quality of each asset.

Get in touch

Whenever you navigate the complicated world of tax deductions, it is important to know what you are doing and it pays to consult an expert. It is always worth asking a specialist quantity surveyor about what you can claim on your property. If you want expert advise about your investment property or for more information, get in touch with Clark Real Estate today!