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Capital Allowances for Investment Properties

Gearge Brand Real Estate Terrigal, Central Coast, NSW

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Tax depreciations reports

Do you own an investment property? Are you claiming all of your entitlements? Many owners of investment properties do not claim the full Tax Depreciation amounts that they are entitled to. All income producing property owners are entitled to claim Tax Depreciation. It is common belief that old properties do not have any depreciation value remaining, this is not always the case, for example renovations and structural improvements are claimable.

Quantity Surveyors are the only profession fully recognised by the Australian Tax Office to produce a detailed Tax Depreciation report on behalf of the owner/s of the property. Denary Quantity Surveying is registered with the Tax Practitioners Board (TPB) which is an ATO requirement. If you have any questions about your property please call us on (02) 4962 1505 or email info@denary.net.au

What is tax depreciation?

Under ATO legislation property investors are able to claim a non-cash deduction in relation to the building structure as well as plant and equipment items associated (such as Carpet, Light Fittings and Kitchen Appliances). This deduction can be claimed by any owner/s of an income producing property. This non-cash deduction is reduced from the property owners annual taxable income, therefore reducing the amount of tax paid.

Methods of depreciation

There are two methods to work out the decline in value of a depreciating asset:

Diminishing Value (DV) Method

The diminishing value method assumes that the decline in value each year is a constant proportion of the remaining value and produces a progressively smaller decline over time.

Prime Cost (PC) Method

The prime cost method assumes that the value of a depreciating asset decreases uniformly over its effective life.

Areas of depreciation

There are two areas of depreciation available to property tax depreciation reports.

Division 40 - Depreciating Assets

Depreciating assets are assets with a limited effective life that are reasonably expected to decline in value. The decline in value is based on the cost and effective life of the depreciating asset, not its actual change in value.

Division 43 – Capital Allowances

Capital allowances are the Building Allowance and Structural Improvement deductions that are available for buildings. Depreciating rates are either 2.5% or 4% dependent on the use of the building and construction commencement date.

If you have an investment property in Newcastle, the Hunter Region, the Central Coast or Sydney and wish to discuss the potential tax depreciation available for your investment property please call Denary Quantity Surveying on (02) 4962 1505 or email info@denary.net.au or visit our website at www.denary.net.au