Common questions
What is property depreciation for tax purposes?
Property depreciation is a tax deduction that allows investment property owners to claim the natural wear and tear of their building structure and plant & equipment items over time. In Australia, this includes capital works deductions (2.5% per year for the building structure) and plant & equipment depreciation (for removable items like carpets, blinds, and appliances).
What properties are eligible for depreciation claims?
To claim depreciation in Australia, your property must be income-producing (rented out). For capital works deductions, the building construction must have commenced after 15 September 1987. Properties built before 1985 cannot claim capital works but may still claim plant & equipment depreciation and deductions for renovations completed after 1985.
What's the difference between capital works and plant & equipment depreciation?
Capital works (Division 43) covers the building structure including walls, roof, doors, and fixed items, depreciated at 2.5% per year over 40 years. Plant & equipment (Division 40) covers removable items like carpets, blinds, air conditioners, and appliances, depreciated over their effective life (typically 5-10 years) using either prime cost or diminishing value methods.
How much can I save through property depreciation?
Depreciation savings depend on your property's age, value, and your marginal tax rate. A new $750,000 property might generate $15,000-20,000 in first-year deductions, saving $4,500-9,000 in tax for someone on a 30-45% tax rate. Over 10 years, total tax savings can exceed $30,000-50,000.
Do I need a quantity surveyor for depreciation claims?
While not legally required, a professional depreciation schedule from a qualified Quantity Surveyor is highly recommended. They can identify all depreciable items and maximise your claims. The cost (typically $500-700) is tax-deductible and usually pays for itself through increased deductions in the first year alone.