NBtax Tax Bites

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Maximise Depreciation, Enhance Your Investing Capital!

If you are in the property investment industry, your primary goal is to maximise the return on your investment. Part of that equation is ensuring that you are taking advantage of the maximum allowable depreciation amount on your investment properties. The majority of investment properties, regardless of their age, size, or classification (commercial, residential, or industrial) are allowed to be depreciated a certain amount each year. The key to leveraging this allowable depreciation is to maximize the amount that you are taking on an annual basis. This is where our NBtax solution comes into play.

Read on, and find out how you can become a smarter property investor by maximising the depreciation claimable on your investment properties.

Plant and Equipment Depreciation
This area is also known as Division 40. This type of depreciation usually applies to mechanical fixtures, or other qualifying items that can be readily removed from a property. As opposed to items that are permanently attached to the structure. Some items that fit the criteria for Division 40 classification are freestanding furniture, blinds, ovens, water heating systems, and unattached lighting. This list is by no means all-encompassing, however it provides some general context.
An important factor to note regarding depreciable Division 40 items is that their opening value can be apportioned across the purchase price generally giving a higher opening value.

Capital Works Allowances
This is the other major area of property tax depreciation. Also known as Division 43, these deductions are taken against the building itself (or more specifically, the structural elements). The amount that you can depreciate is contingent on the actual cost of construction, and includes building supplies such as wiring, doors, windows, bricks, and mortar. The rule of thumb is that if the item in question can't easily be removed and is permanently attached, it falls under Division 43. 

It's important that you are knowledgeable and accurate about whether an item falls under the Division 40 or Division 43 classification, and the answer is not always clear. For example, an air conditioning unit falls under Division 40; however, the air conditioning ducts that work in tandem with the air conditioning unit would fall into the Division 43 category.

Given the questions that are bound to arise and the confusion that comes with a property tax depreciation schedule - and to avoid penalties or fines for unintentional mistakes by remaining compliant with ATO regulations - the prudent course of action is to allow the professionals at NBtax to handle preparation of your property tax depreciation schedules.

We will be happy to put our 30 years of experience to work for you. Please don't hesitate to contact us to order your property tax depreciation schedule today!