How to maximise your property depreciation deductions

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An effective way to maximise returns as a property investor is to claim depreciations on your investment properties. Depreciation gains can be maximised by using a quantity surveyor to identify your property’s individual assets that are eligible for deductions under ATO regulations.

A quantity surveyor is a licensed cost manager who assesses your property onsite, monitors construction costs, and provides you with a tax depreciation schedule. A quantity surveyor will inspect your property to quantify all the assets you have and a tax depreciation schedule is a compilation of your property’s building costs and asset values at their respective depreciating rates. It also incorporates the annual value for your property’s depreciation due to ageing and wearing out. Obtaining a tax depreciation from a quantity surveyor will help you maximise your depreciation deductions as it is a physical record of your deductible assets to submit to the ATO when claiming deductions.

Within the depreciation schedule is a section called ‘capital works deductions’. Renovations done after 1987 (even if you did not make those renovations) are eligible for capital works deductions, along with estimated costs of developing and building allowances on properties constructed after 1987. Capital works deductions typically make up between 85 to 90 per cent of the total depreciation claim.

Also included in the tax depreciation schedule are Plant and Equipment deductions. These are items that can easily be removed from the property and are affected by condition and quality. Items in this category include security systems, solar panels, hot water systems, heating and air conditioning units, light fittings, swimming pool filtration and cleaning systems.

You will need to submit your property’s depreciation schedule as part of your tax return to the ATO to claim your expenses. Your report can also be updated yearly by an accountant if any more deductible changes are made. Keep in mind that alongside helping you with your depreciation deduction claims, the cost for hiring a quantity surveyor is also tax-deductible.

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