Property Depreciation Facts & Figures for Beginners


How I wished money grew on trees, because if it did, then we didn’t have to worry about inflation, taxes or even depreciating values on our cars and homes or buildings! Oh, speaking about property depreciation Brisbane, this is actually defined as the natural wear and tear of a building and its asses over time. The Owners of income-generating properties can claim depreciation as a tax deduction, and they don’t need to spend any money in order to claim it. Here are a couple of property depreciation facts and figures for beginners.

What Can Be Depreciated, & How is it Claimed?

Okay, let’s first talk about what can be depreciated, and how do you claim it. According to our friendly and seasoned experts, property depreciation Brisbane can be claimed for the structural component of the building, and we call this “capital works deductions”.

Depreciation can also be claimed for easily removable or mechanical assets, like plant and equipment deductions. However, a common misstep when claiming property depreciation Brisbane is assuming that it can be computed or calculated by an accountant at tax time.

However, this is not always the case because specialist quantity surveyors are the ones recognised by professionals as having the skills and expertise to fully estimate construction costs for depreciation purposes.

Following a site inspection by the specialist quantity surveyor, the expert will complete a depreciation schedule for the property. And accountant will then use this to properly determine the investor’s depreciation deductions each year.

Depreciation of Second-Hand Properties

According to a survey by a renowned property development firm Down Under, most investors regularly choose to buy second-hand properties over brand new. It is crucial for investors to know that they should be aware of recent changes which affect property depreciation Brisbane for second-hand homes and properties.

Under legislation changes which were introduced in 2017, the owners of second-hand properties cannot claim depreciation on previously-used plant and equipment assets. However, they still can claim depreciation on any assets they buy for the property, and all the qualifying capital works deductions.

On average, deductions on capital works makes up to 85% to 90% of a total depreciation claim, so there is still a lot available for second-hand properties.

Depreciation for Apartments & Townhouses

Now, let’s discuss property depreciation Brisbane for strata properties, like apartment or townhouse complexes. The depreciation for strata properties works in the same way as it does for single houses, but with one addition.

Like, owners of strata properties can claim depreciation on what is referred to as common property assets like garbage bins, elevators and shared gym equipment. Common property depreciation Brisbane

Can be different for each owner however within the strata complex. Why? This is because the value of the asset is often based on the owner’s interest, and this usually results in the common property asset qualifying for an intermediate deduction, or it falls into a low-value pool.

How Property Depreciation Boosts Cash Flow, & How Do You Claim It

According to the Australian Taxation Office, as a building or structure and the assets contained within it depreciate. The office also adds that this allows owners of income-generating properties to claim this depreciation as a tax deduction.

Now, how does property depreciation Brisbane enhance cash flow? Because it’s a tax deduction, which is taken from an investor’ pre-tax income, which means that the property owner pays less tax.

In some instances, property depreciation Brisbane can turn a positively-geared property into a negatively-geared one, without making any additional costs.  This often results in a big reduction in the investors’ tax bills.

Now what can you claim for property depreciation Brisbane? Deductions on depreciation are divided into two distinct categories – Division 43 capital works allowance and Division 40 plant and equipment depreciation.

The capital works allowance refers or relates to claims for wear and tear which occur to the structure of the property, as well as any fixed items. Capital works includes items like the roof, walls, doors, kitchens, bathroom sinks and tubs, toilet bowls and cupboards.

Generally, any residential building where construction started after September 15, 1987 will entitle its owner to capital works deductions. These deductions can be claimed at a rate of 2.5% per year for up to 40 years.

The owners of buildings built prior to 198 should still find out what deductions are available, as often these structures have undergone some type of renovation which can result to capital works deductions.

Plant and equipment property depreciation Brisbane can be claimed for easily-removable fittings and fixtures that are found within the property. In fact, there are more than 6,000 various depreciable assets that are recognised by the Australian Taxation Office and these include items like blinds, air conditioners, carpets, hot water systems, smoke alarms and ceiling fans among others. Each plant and equipment is also assigned an individual effective life and depreciation rate.

Under the current legislation in Australia, the owners of second-hand residential properties who exchanged contracts after 7:30 pm on May 2017 cannot claim deductions for previously-utilised plant or equipment assets.

The investors who purchase brand-new and substantially repaired or renovated properties, commercial real estate or add new plant and equipment assets to a second-hand residential property, can actually still claim considerable property depreciation Brisbane deductions.

Now, in addition to property depreciation Brisbane, what other expenses can you claim? Okay, according to the ATO, the expenses that you may be entitled to claim on your investment property include advertising for tenants, body corporate fees and charges, council rates, water charges, land tax, cleaning, gardening and lawn mowing, pest control and insurance.

You can also claim for interest expenses (that’s if the property is rented out of generally available for rent in the income year that you claim a deduction), pre-paid expenses, property agent’s fees and commissions, income protection insurance,  repairs and maintenance and some legal expenses.

So, while all residential property investors are able to claim property depreciation Brisbane, investors who buy new properties will usually be able to claim higher deductions, and this can be very appealing. Make sure you seek a professional opinion by discussing your personal circumstances with your financial advisor or accountant.


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