Tax depreciation

The definition of depreciation is “a reduction in the value of an asset over time, due in particular to wear and tear.”

The Australian Government allows you to claim depreciation allowances on buildings, plant and equipment associated with properties earning a rental income. Just like you claim wear and tear on equipment purchased for your business, you can also claim depreciation on your investment property reducing your taxable income.

Property tax depreciation (or ‘capital allowances’) is calculated from two different aspects of your investment property:

1. Depreciating assets which are plant and equipment – items within the building, apartment or house such as flooring, lifts, security systems, appliances, white goods and even furniture.

1. Building Allowances are primarily based on the structure of your asset. Claims for these are dependent on the original construction costs and the construction date of your property. As a rough guide, commercial properties built after July 1982 and residential properties built after July 1985 are eligible for deductions.