There are lots of property related tax deductions that all investors claim: council rates, water rates, property management fees, repairs. But depreciation is one that many people don’t even know about.
Think of it as compensation for wear and tear. Buildings suffer wear and tear, and so do their contents. If you are renting out a property, you can claim this as a tax deduction.
To claim depreciation, you need a Quantity Surveyor to put together a document called a Depreciation Schedule. It sets out how much you can claim every year as a deduction.
Depending on when your property was built, the Quantity Surveyor will estimate the construction cost at the time it was built and they will put a value on it. You will claim this at 2.5% per year.
You can even claim depreciation on renovations done by a previous owner.
If you bought the property before May 9, 2017, you will also be able to claim depreciation on the Assets: appliances, carpet, air con etc, that were in the property when you purchased it.
On a recently built property, the tax deduction for depreciation can easily be around $8,000 per year, so in many case it could be an investor’s biggest property related tax deduction – what a pity that so many people forget to claim it.