04 May

What first time property investors need to know about depreciation

Buying your first investment property can be daunting and exciting at the same time. You are likely to question; have you made the right decision for your financial needs? Will you have great tenants?   Have you invested wisely? In the right property? In the right location?

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These questions plus more will be racing through your mind.   And a lot of the time, you will have a financial adviser, real estate agent, conveyancer or solicitor who will help you go through the motions of what you need to have in place to progress to settlement date.

But unfortunately, there is one document that is an important document, that, despite all this help – might slip through the cracks and be missed. This document is known as a tax depreciation schedule.

What is a tax depreciation schedule?

A tax depreciation schedule is a comprehensive report that outlines the rental property depreciation deductions that are available to the property investor for owning that property. It can total thousands of dollars in deductions which can help to reduce an investors tax. A qualified quantity surveyor is one of only a few professionals that can generate a tax depreciation schedule.

What is rental property depreciation?

The ATO allows property investors to claim deductions against the income they generate from their investment property. You may be familiar with some of these deductions, ie. interest on loan, real estate management fees, repairs and maintenance.

However, many first-time property investors and even some experienced property investors just don’t know that they could claim a deduction for the wear and tear of their investment property. This is known as the rental property depreciation deduction or the tax depreciation deduction. It is one of the largest deductions you can claim on an investment property. You could potentially claim thousands in deductions.

The rental property depreciation deduction falls into two categories –

  • Division 40 – any brand-new plant and equipment items installed at an investment property ie. stove, carpet, blinds.

  • Division 43 – the structural component of the property ie framing, plasterboard, roof, renovations completed by previous owners and current property investor.  

Together they can add up to significant dollar amounts and can help reduce your taxable income.

Below we look at our property investor clients Stella and Tim who purchased an existing four-bedroom home in February 2021. A major renovation was completed by the previous owners that consisted of kitchen, bathroom and laundry. Below is what they were entitled to claim in rental property depreciation deductions:

4 bedroom existing home table

How do I claim tax depreciation?

Once you have ordered and received your tax depreciation schedule you will take this along to your accountant. They will claim on your behalf for the relevant financial years along with any other deductions you are entitled to claim.

How do I know if it is worth claiming the tax depreciation deduction?

Here at Capital Claims Tax Depreciation, it is our guarantee we do not complete a tax depreciation schedule on a property that isn’t worthwhile. We complete a free feasibility on every investment property.

To complete your free feasibility, we request your investment property address and a few other details like your settlement date. We then view your investment property with our online systems and give you an estimate of what you can expect to receive in tax depreciation deductions. This allows you to make an informed decision if you would like to go ahead with investing in a tax deprecation schedule.

How much does a tax depreciation schedule cost?

There are a lot of ways that we use available information to quote on an investment property. We give a personalised quote for every investment property. It is best to speak to us directly on 1300 922 220 or you can complete an online quote here. We always give our clients the best price possible with maximum returns.

Your tax depreciation schedule is also a one-off fee that is 100% tax deductible. You do not need to get a tax depreciation schedule year after year.

If you complete any major renovations or works during the time of ownership, we may need to come to site to inspect the property and works in order to complete the updated Capital Allowance and Tax Depreciation Schedule for a minor fee.

If, however, you complete minor updates and improvements that you are not able to claim as repairs and maintenance, (eg installed a new asset) we will complete the update for free. Other tax depreciation providers may charge up to $300 for this!

Free Resources

We like to keep our property investor community up to date with what happening in the world of tax depreciation.

Below is a list of our popular eBooks. Just click on them to download for free. You will find loads of information on tax depreciation.

We also have a mailing list that you can subscribe to where you can receive monthly updates. Just email Kyliew@capitalclaims.com.au and request to be added. Visit our blog page, new blogs are released every month. We are very active across all social platforms, facebook, Instagram, twitter.

If you would like to discuss your investment property with one of our friendly team members, call us on 1300 922 220. We are always happy to have a chat and answer any questions you may have about rental property depreciation.

Goodluck on your investment property journey, remember to claim all of your available tax deductions, especially the tax depreciation deduction!

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About Mark Wilkins

Mark is an expert quantity surveyor, business owner, public speaker and property developer. With 20+ years experience in the construction and quantity surveying industry Mark’s specialist expertise have been sought in consultant capacity by professional bodies such as the National Institute of Accountants and the National Tax and Accountants Association, and he has presented at various property and tax seminars and expos nationwide. Mark holds a Bachelor of Construction Management from the University of Newcastle, is an affiliate member of the Australian Institute of Quantity Surveyors and a Registered Tax Agent.

View all posts by Mark Wilkins

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