Tax depreciation is a deduction that property owners can claim for the natural wear and tear of their investment property, covering both the building’s structure (Capital Works Depreciation) and its removable assets (Plant and Equipment Depreciation). Capital Works Depreciation applies to fixed elements like walls and floors over a period of 25 to 40 years, while Plant and Equipment Depreciation covers items such as carpets and appliances based on their effective life. To claim this deduction, property owners enlist the services of a quantity surveyor to assess and calculate the depreciable value of assets. The total depreciation amount can then be included in the owner’s annual tax return, leading to potential tax savings. It’s advisable to stay informed about any changes in tax laws and regulations through professional advice.

The renovations under capital works (Division 43) carried out by the previous property owners can be claimed, provided they were finalized after the 27th of February 1992. In terms of plant and equipment (Division 40), you can only claim these items if you acquired the property before the 9th of May 2017. If the purchase occurred after this date, these items are classified as second-hand and are no longer eligible for depreciation claims.

1. Building — Capital Works (Division 43) (the bricks & mortar, this is the actual main
   structure)
2. Structural Improvements (Division 43) (this refers to external works such as pool, fencing,
   paving etc.)
3. Plant & Equipment (Division 40) (Typical P&E items for a residential development include carpets, curtains, air conditioners etc.)

A big misconception, is that you cant claim depreciation on older properties. The Australian Taxation Office (ATO) allows investors to claim building depreciation (Division 43 – capital works) for all residential investment properties, as long as they are constructed after September 1987. Even for properties built before 1987, there’s a potential for depreciation claims if the property underwent renovations after February 1992. Plant & Equipment (Division 40) can be claimed for older properties purchased before May 9, 2017, and rented out before July 1, 2017.

Unlike residential properties, if you acquire and possess the space for your business operations, the ATO permits you to claim depreciation as a deduction. All commercial property qualify for depreciation (depending qualifying dates) including all qualifying P&E bunlike residential which is date specific (eg. 7^th May 2017)

Depreciation serves as a tax deduction for individuals who own property with the intent of generating income, regardless of its current income-generating status. In situations where there are no tenants, it’s crucial to establish that the property is held with the purpose of producing income and that there’s a reasonable expectation for future revenue.

There are three categories for claiming depreciation on residential investment properties:

Built between 18 July 1985 and 26 February 1992

If your residential property was built after July 1985, you will be able to claim both Building Allowance and Plant and Equipment.

After Feb 1992

If your property was built after February 1985 and renovated you can claim depreciation, even if it was a previous owner who did the renovation.

Renovated properties.

As long as the renovation was conducted after Feb 1992, you can claim the renovation regardless of who did the works.

Thankfully, no. Our tax depreciation schedules remain valid for the entire 40-year depreciation period, based off the original construction date. You only need to acquire one for each of your investment properties. The report will capture all the depreciation within the schedule.

Yes, 100%!

Accountants lack the ability to ascertain the construction cost and are therefore not qualified to prepare Tax Depreciation Schedules, leaving it to Tax Depreciation Specialists to determine these estimates. These reports are crafted by certified Registered Tax Agents sanctioned by the Tax Practitioner’s Board.