Property depreciation for tax time

What is property depreciation?

All buildings and their contents that are used to produce income are eligible to be depreciated. As a landlord this will be an important element of your tax return which your accountant will be well versed in.

The Australian Taxation Office (ATO) allows owners of income producing properties to claim this depreciation as a deduction. Depreciation is considered a non-cash tax deduction. Other deductions, such as interest on a loan where you need to outlay money in order to make a claim, are not treated the same way.

All types of income producing properties have substantial taxation benefits. Both old and new properties will attract some depreciation benefit that the investor is able to claim to reduce their tax liability. It is often mistakenly believed that older properties attract no claim, however this is not the case. Speak to your accountant about any property you own, regardless of its age.

With an investment property, you are allowed to claim depreciation on certain items against your taxable income. The two types of depreciation tax deductions that you can claim include:

  • Depreciation on plant & equipment: this refers to items within the building like ovens, air conditioners, hot water systems, carpets, blinds etc.
  • Depreciation on buildings or ‘building allowance’: this refers to the construction costs of the building itself.

In the case that an investor hasn’t been claiming deductions for tax depreciation, previous financial years’ tax returns can in fact be amended. You may be able to alter previous two years worth of tax returns, and it’s possible that the ATO may need to pay you money back.

What is  a depreciation schedule?

A depreciation schedule is a report that identifies all the things that may be claimed against your tax and the current value of each item. Every property is different, so the amount of tax benefit you receive will depend entirely on the property itself.

It’s ideal to get a depreciation schedule as soon as the property settles, however it can be done at any time, though preferably prior to tenants moving in. A Quantity Surveyor will prepare your depreciation schedule report.

The key points to remember are:

As a property gets older the building and the items within it wear out they depreciate in value. The ATO allows property investors to claim a deduction for these things.

Investors need to engage a specialist to complete the inspection and schedule to enable the maximisation of a tax depreciation claim. The ATO only allows select professions such as Quantity Surveyors to undertake and complete these reports.

Have further questions? contact our property manager Kellie Papworth on 5261 4711

Kellie Papworth






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Property depreciation for tax time