What Property Investors Need to Know: Claiming Depreciation on Rental Property - January 2022

By Guest Blogger, Peter Foldes, 

Washington Brown Depreciation 

What is Property Tax Depreciation?

Put simply, Property Tax Depreciation is the ability to claim a yearly tax deduction against the “wear and tear” of a property used for income-generating purposes.

This is similar to how a business might claim the depreciation deduction on their equipment or vehicles for example.

A property investor may be eligible to claim depreciation against structural elements (like bricks, windows, concrete etc) and non-structural items such as ovens, dishwashers, carpet and blinds.

The age of the property and the type of ownership structure will affect the potential tax depreciation deductions available. Investors need an expert Quantity Surveyor to work out exactly how much they are legally entitled to claim.

How will it help me as a property investor?

A property tax depreciation schedule will save you money by reducing your taxable income by the amount of depreciation apportioned to that particular financial year. This report shows the amount of deductions able to be claimed each year of ownership for the maximum 40 year period.

As a “Non-Cash deduction”, the amount of depreciation you can claim is already inbuilt within the property when you acquire the property. You don’t have to spend extra money to claim the deduction, unlike other property and finance related expenses.

If you own an investment property, it ALWAYS worthwhile checking to see if you are eligible to claim depreciation deductions.

Can you Claim Depreciation on an Old Property?

In 2017, the Federal Government depreciation legislation changed. This significantly affected how property investors claim depreciation on investment properties.

Whilst investors can no longer claim depreciation on second-hand “previously used” assets such as dishwashers and ovens, they are still eligible to claim deductions against the Building Allowance or Capital Works component.

Despite these legislation changes, it is important to note that:

• If your property was built after 1987 - There will be building allowance deductions available.
• If your property has been improved or renovated yourself or a previous owner – There will be building allowance deductions available.
• Brand new items (Plant and Equipment) included in a renovation can be depreciated where the property has been available for rent from the time the renovations finished in order for the items to qualify.

Is a Depreciation Schedule Worthwhile for Your Property?

Property Buyer clients have access to Washington Brown Depreciation’s exclusive investment property depreciation calculator - for FREE.

Use this tool to find out how much you can claim on your investment property.

For further information on depreciation or to ask a question about deductions and pricing for your specific property, please contact the team at Propertybuyer or submit a request here

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