Every year thousands of property investors pay more tax than they have to because they don’t claim a tax deduction for the depreciation of their investment property.
Depreciation is an accounting term that refers to the ageing and wearing out of an asset over time, and it is typically one of the greatest tax deductions claimable by property investors.
Even if an investment property appreciates (goes up in value), from an accounting and ATO standpoint the construction and included fixtures and assets still wear out and diminish in value over time (they depreciate). This loss in value each year is claimable as a tax deduction. Ensure you get reliable quantity surveyors services in Australia before looking into tax depreciation.
Depreciation is claimable as a tax deduction on both commercial and residential investment properties. The deduction is applied against the property’s income in exactly the same manner that other property costs are e.g. borrowing costs, property management fees, repairs and maintenance etc.. Unlike those expenses, depreciation is a calculated deduction, you don’t need to incur an expense that year so as to claim it, it is calculated for you by a quantity surveyor.
A quantity surveyor will give you a Capital Allowance and Tax Depreciation Schedule, which you then provide to your accountant when completing your tax return.