What is Tax Depreciation?

The Australian Taxation Office (ATO) allows investment property Owners to claim a tax deduction on the fair wear and tear on an investment property and it’s fittings. Tax depreciation is split into two categories; Division 43 Capital Works Allowances (the building itself) and Division 40 Plant and Equipment (eg. carpets, blinds, A/C, ceiling fans etc.). Tax depreciation is essentially a non-cash deduction. You don’t necessarily have to directly incur the expense to be able to claim the deduction, you can inherit deductions upon acquisition of the property (different rules apply for residential properties purchased post 9 May 2017, contact us for more information). 

Capital Allowance and Tax Depreciation Schedules are your key, as a Property Investor, to reducing your tax payable or increasing your tax refund. As every seasoned Investor knows, a tax depreciation schedule is a must for any Investor. A new property could expect tax deductions in the first full financial year alone of $8,000 – $15,000.