What is property depreciation and how can it help you?

Properties and the plant and equipment assets contained within them all go through a process of wear and tear.The Australian Tax Office (ATO) allows property investors to claim tax deductions based on this wear and tear. This claim is called property depreciation.

Depreciation deductions will significantly improve a property investor’s cash flow. Research shows the average investor can expect between $5,000 and $10,000 in deductions in their first year’s claim alone. Despite the potential returns, research shows 80% of property investors fail to claim depreciation.

Investors can claim two types of property depreciation. Capital works deductions are available for the structural elements of a building; such as roofs, windows and doors. These deductions can be claimed against the building’s historical construction cost at a rate of 2.5% each year for up to forty years.

There are some restrictions however. Capital works deductions only apply to residential buildings constructed after 15^th of September 1987. Despite this fact, the owners of older buildings are eligible to claim depreciation deductions for the plant and equipment items contained within the property as well as for any more recent renovations completed.

Plant and equipment depreciation can be claimed for mechanical or removable assets. Examples include carpets, hot water systems, blinds and light fittings.  These deductions are calculated based on an individual effective life assigned to each asset by the ATO. A dishwasher for example has an effective life of ten years and will be depreciated at a rate of 20% each year.

By educating your clients about property depreciation, not only will you assist their cash flow, but you will also add value to your own service. In turn, investors will be more likely to use your service again when expanding their investment portfolio.

BMT Tax Depreciation offers a complete range of complimentary services for property professionals including training, educational material, webinars, estimates and articles. To find out more visit the BMT Property Professionals page by clicking here. Alternative you can contact one of our friendly staff on 1300 728 726.

Article provided by BMT Tax Depreciation. 
Bradley Beer (B. Con. Mgt, AAIQS, MRICS) is the Managing Director of BMT Tax Depreciation.  

Please contact 1800 661 662 or visit www.bmtqs.com.au for an Australia-wide service.