NBtax Tax Bites

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Be a Savvy Property Investor!

Buying property for investment purposes can be a lucrative endeavour for those who understand some of the tips and tactics utilised by the most experienced investors in this field. Most of those who are active in the property investment sector are knowledgeable about the significant tax deductions that are available. However, out of all the tax deductions that investors are entitled to, property tax depreciation is often the most often overlooked for one simple reason: it is a non-cash deduction. This means that an investor need not spend any money in order to claim this deduction. It should be noted, however, that merely because an investor neglects to claim property tax depreciation does not mean that the depreciation has not occurred. It is imperative that every investor in residential, commercial, and indeed any type of investment property claim all of the property tax depreciation deductions that they qualify for. Read on for a breakdown of the two different types of property tax depreciation deductions.

DIVISION 40

Plant and equipment depreciation is often referred to as "Division 40” or Capital Allowances. The main stipulation that determines if this depreciation allowance applies is whether or not an item is able to be easily removed from a given property. Most furniture, decorative items, and lighting that is not permanently attached to the investment property qualifies for this deduction. The primary question to determine the applicability of the Division 40 deduction is; can this item be easily removed without damaging it? 

If the answer is yes, it is most likely Division 40. If the answer is no, the item is most likely...

DIVISION 43

Usually referred to as "capital works allowance" or "building write-off", this deduction applies to the actual structure and any items that "cannot be easily removed". Two important points to note about the Division 43 depreciation: 

  1. It is allowed to be claimed at a rate of 2.5% over 40 years, and
  2. Residential investment properties on which construction started before September 15th, 1987, are not allowed this deduction. However, be advised that renovations on these types of residential structures that were completed after the dates established by the Australian Taxation Office (ATO) may be eligible for the depreciation deduction - even if completed by a previous owner.

Correctly claiming all of the property tax depreciation deductions that you are entitled to is a crucial step in ensuring that you are not leaving any investment capital on the table. For this reason, it is vital that your property tax depreciation schedule is thorough, accurate and very importantly, compliant. 

This is where NBtax by Napier and Blakeley will be your staunch advocate. Contact us today, and rest easy knowing that your property tax depreciation schedule is top-notch!