What you need to know about claiming depreciation on your residential investment property

The national property market is currently hot and we’re seeing cashed up investors snapping up residential property to be rented and used to generate income. 

If you’re an investor it’s important to arrange a tax depreciation schedule that will allow you to claim significant tax-deductions.  

The investment property must be accurately assessed and an ATO certified tax depreciation report provided by a qualified Quantity Surveyor. This report will allow you to substantiate investment property deductions at tax time.

Here is some information that will help you understand what rental property depreciation is and what you can claim.

What is rental property depreciation?

The Australian Taxation Office (ATO) allows owners of residential rental properties to claim a tax deduction on the fair wear and tear on an investment and it’s fittings. Tax depreciation is essentially a non-cash deduction.  You don’t necessarily have to directly incur the expense to be able to claim the deduction, you can inherit deductions upon purchase of the property.

What can be claimed?

According to the ATO, there are two categories of depreciating assets under which property investors are eligible to claim deductions for

What are capital works deductions?

A residential property investor can claim Capital Works Deductions on the depreciation of the structural elements of the building as well as the fixed items within the property.

A property investor is also eligible to claim construction costs for improvements or alterations made to their income-producing property.

Legislation: Property investors owning residential properties built after 15 September 1987 can claim a capital works deduction at a percentage rate of 2.5% per annum over 40 years. However, if construction commenced between 21 July 1982 and 15 September 1987, it can be depreciated at a rate of 2.5% or 4%.

 

Assets that qualify for a capital works deduction
  • Bricks and mortar
  • Walls
  • Flooring
  • Electrical wiring
  • Doors and attachments
  • Sinks and basins
  • Fences
  • Retaining walls
  • Baths and showers
  • Toilet bowls

Also claimable are construction improvements:

  • building extensions such as adding a room or a deck;
  • altering a building such as adding or removing an internal wall;
  • structural improvements such as adding a carport or retaining wall.

What are plant and equipment deductions?

Assets in a residential property that are easily removable or are mechanical in nature can be claimed for depreciation for wear and tear.

Legislation: The federal Government in November 2017 issued changes to the ways depreciation for plant and equipment can be claimed by residential property investors.

Previously used plant and equipment assets like easily removable items such as smoke alarms, hot water systems found in a second hand or previously owner-occupied residential investment properties post 7:30pm on the 9th of May 2017 – will not be able to claim depreciation.

 

Assets that qualify for a plant and equipment deduction:
  • Air-conditioning units
  • Blinds and curtains
  • Hot water systems, heaters, solar panels
  • Security systems
  • Light fittings
  • Swimming pool filtration and cleaning systems

Why engage Acumentis to maximum your tax depreciation benefits?

Knowledge & Expereince

Our registered team of professionally certified valuers are experts across commercialresidential and rural and agribusiness property types. We know what depreciable items to look for ensuring that you get a comprehensive ATO approved depreciation schedule prepared by our certified Quantity Surveyors.

Value

We’ll provide you with one tax depreciation schedule that lasts up to 40 years of claim and the fee is 100% tax deductible. We can also undertake a retrospective tax depreciation schedule if you haven’t been claiming deductions so that you don’t miss the tax benefits.

National Reach

Wherever you are in Australia a qualified Acumentis property professional is nearby. With over 300 property professionals working from 40 offices in metropolitan, regional and rural Australia our team have your property and tax depreciation needs covered.

Find out how Acumentis assisted Kirk in achieving a tax deduction of $17,000 the first year of owning his investment property.

If you’re ready for Acumentis to help you claim back more at tax time and maximise your investment property, call us on 1300 882 401 or request a quote

Ernest van Zyl
Manager Property Advisory Services
— Brisbane
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