The benefits of Depreciation
Depreciation is essentially a tax deduction available to all property investors. A property investor is able to claim depreciation on both residential and commercial property, so it does not matter what type of property buyer you are, you are still entitled to claim your share of depreciation!
You see all other property tax deductions you can claim, you have to physically pay for, such as rates, interest payments & property manager's fees.
The difference between the Building Allowance and Plant & Equipment-
- The building allowance allows you to claim the actual structure of the property and include items like the bricks, concrete, ducting and vents.You can claim the building allowance at a fixed rate of 2.5% per annum based upon the original construction cost and it starts from the when the building was originally completed. The ATO has determined a Quantity Surveyors construction cost estimate will be accepted in cases where the original costs are unknown.
- Plant and Equipment items within the property are those that will wear out quicker and are easily removable. Some common items include ceiling fans, carpet, ovens and freestanding furniture.
Why am I able to claim depreciation?If you are a property investor you are able to claim depreciation because your investment property earns income, through the form of rental payments from your tenants. So, as with any activity that produces an income, there are various tax deductions available to you.
How do investors benefit from a depreciation schedule?Depreciation allows investors to reduce the amount of taxes they have to pay. Investors are able to claim depreciation on the wear and tear of the property and on any renovations they have made to the property.
Case Study - Renovating a property
With his passion and knowledge of property depreciation, Tyron is a regular speaker at industry conferences and is often quoted in national media. He has also published numerous articles and books including his popular CLAIM IT! book.