As a property investor, you’re always on the lookout for ways to make your money go further. Smart financial decisions have got you where you are, after all, and it’s vital you maintain your eye for a good deal.

What if we told you that an average rental property investor could make $9,000 just by deducting it from their taxes? 

This option, known as property depreciation, is available for anyone who has bought a property for income-producing purposes, but it remains relatively unknown. In this guide, we’ll explore what property depreciation means and how you can start claiming this tax relief today.

What is Property Depreciation?

Every house in the world undergoes gradual wear and tear that slowly reduces its value and forces homeowners to spend money on repairs. The Australian Taxation Office (ATO) allows rental property owners to claim this deterioration as a tax deduction ー this is known as property depreciation.

Property depreciation can be claimed as one of two categories:

  • Capital Works: These deductions relate to the structure of the rental property and any fixed assets, such as doors, walls, and roofing. Owners of any residential property that began its construction after 1987 can claim capital works deductions.
  • Plant and Equipment Assets: These involve deductions regarding the easily removable fixtures within the property, including carpets, alarm systems, blinds, and hot water systems. Recent legislation changes introduced in 2017 mean that you can only claim depreciation for plant and equipment assets if they were purchased and installed after 2017.

It’s a non-cash deduction, meaning investors don’t have to spend money to claim it back. This leads to huge savings, as investors can reduce their taxable income and save money without spending anything. Claiming property depreciation also helps optimise cash flow and enhance your overall profitability and ROI.

Despite these benefits, property depreciation is often underestimated, even though it’s one of the largest tax deductions for property investors alongside investment loan interest.

How Can I Claim Property Depreciation?

The simplest way to start claiming property depreciation is to prepare a tax depreciation schedule for your desired rental property. Only specialist quantity surveyors, like BMT Tax Depreciation, are allowed to do this, working alongside your accountant.

At Advisory One, we work closely with companies like BMT Tax Depreciation to produce a tax depreciation schedule that lasts for forty years. You’ll be able to know exactly how much to claim each year, so you can safely and legally enhance your savings and profitability. 

Find Expert Taxation Support with Advisory One

Even the investment pros sometimes miss tax deductions and potential savings, which is why we’re here to provide comprehensive and reliable support for your individual taxation requirements. Our accounting services can help you identify taxable property depreciations and boost your annual savings.

Contact us today to arrange a consultation with one of our chartered accounts and set yourself on your way to big savings!