Depreciation is a cost you claim on your investment property for the general ‘wear and tear’ of your property.
There are two types of property depreciation allowances available:
1. Plant and Equipment refers to items within the building like ovens, dishwashers, carpet, light fittings, blinds etc. Each item has its own rate of depreciation.
2. Building Allowance refers to construction costs of the building itself, such as concrete and brickwork. It only applies to buildings or improvements made after July 18 1985.
Both these costs can be offset against your assessable income.
Plant and Equipment
This can be quite complex to calculate as each item has its own rate of depreciation. For example, blinds could have a rate of 20% for 5 years while ovens could have 10% rate for 10 years. A detailed depreciation rate for all claimable items can be obtained at the Tax Office. Alternately, your accountant will have access to this information also.
| How do I calculate my depreciation costs on my investment property? |
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Building allowance
If you know the cost of construction for the entire building or renovations, the tax rates are as follows:
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If the building was constructed/ renovated between July 18, 1985 and September 15, 1987, depreciaton is calculcated as 4% of the building cost for 25 years.
- If the building was constructed after September 15, 1987, can claim depreciation of capital works for building and landscaping is at a rate of 2.5% for 40 years.
Hence, most properties constructed before 1985, cannot claim building allowance unless renovations were made.
Property Depreciation Calculator
The best way to calculate your property depreciation allowance is to obtain a Quantity Surveyor to create a schedule for you. This schedule provides you with your allowances for the next 10- 20 years so you only need to obtain it once, if no internal or external changes occur.
You can also use our Tax Depreciation Calculator to get an estimate of potential deductions available to you. The allowances indicated on the calculator are estimations only for property you are about to purchase. The amount indicated would be an estimation of the amount you can deduct.
To get an accurate property depreciation schedule from qualified quantity surveyors, you can request a Depreciation Schedule Quote from Washington Brown Quantity Surveyors – an independent specialist company, or from any other reputable quantity surveyor. The cost of property depreciation schedules are quoted individually and fees are 100% tax deductible.
Always check with your accountant as to what deductions you are entitled to and how depreciation will affect your investment property and particular financial situation.