Sell with Confidence
Read More

Tax Depreciation

What is tax depreciation?
Owners of income producing properties are entitled to claim a decline in value tax deduction commonly known as tax depreciation each financial year. Claiming depreciation is a significant taxation benefit, and one which many investment property owners are unaware of. Depreciation is non-cash deduction – you do not need to spend any money to claim it.

What is property depreciation?
As a building gets older and items within it wear out, they depreciate in value. The Australian Taxation Office (ATO) allows property investors to claim a rental & investment property depreciation deduction related to the building and plant and equipment items contained within it. There are more than 1500 items identified by the ATO as depreciable assets, and BMT Tax Depreciation constantly liaise with the Australian Taxation Office on the latest updates.

In order to claim these depreciation deductions, investors are encouraged to enlist a specialist Quantity Surveyor to complete a comprehensive, personalised tax depreciation schedule. A depreciation schedule outlines the deductions available on a specific property for the life of the property and is used by the property investor’s Accountant when preparing a tax return.

A BMT Capital Allowance and Tax Depreciation Report includes a detailed outline of two major components:

  • Capital Works Allowance (Division 43)
  • Plant and Equipment (Division 40)

What is deductible under Capital Works Allowance?
Here are a few examples of what depreciable items you may be able to claim.

  • Built in kitchen cupboards
  • Clotheslines
  • Door and window fittings (such as handles, locks etc)
  • Driveways
  • Fences and retaining walls
  • Garages
  • Sinks, basins, baths and toilet bowls

Research by BMT Tax Depreciation shows that between 15% and 35% of the construction cost of a residential building is made up of a plant and equipment articles. These include things like carpet, hot water systems, blinds, light fittings and many other items. Maximising their value is the key to maximising a depreciation claim.

What is plant and equipment?
Examples of items that can be depreciated as plant and equipment include:

  • Carpets, vinyl, linoleum and other removable floor coverings
  • Hot water systems, heaters and solar panels
  • Air conditioning units
  •  Blinds and curtains
  • Light fittings
  • Swimming pool filtration and cleaning systems
  • Security systems

We’ve also included a link to BMT Tax Depreciation online calculator. The online calculator can help you estimate the likely depreciation deductions for your investment property.