Maximising Tax Depreciation and Capital Allowance

Are you maximising the tax depreciation and capital allowance benefits available?

All types of income producing properties have substantial taxation benefits available to be claimed as a tax credit. Many property investors are missing out on literally thousands of dollars in lost tax depreciation deductions.

Both new and old properties will attract some depreciation benefit that the owner is able to claim as a tax credit. A common myth is that older properties will attract no claim. Therefore it is worth making an enquiry about any property.

When a property owner has not been claiming deductions for tax depreciation, previous financial years' tax returns can be amended. The Australian Taxation Office (ATO) allows for up to the previous two year returns to be amended, in some instances the ATO may have to pay you money back!

The depreciation benefit available depends greatly on the type of building, its age, use and fitout. Based on the Diminishing Value method of depreciation, the following scenarios are provided as an appropriate guide:

Building Type	2 BR Unit	Townhouse	Residential House	Commercial Building
Purchase Price	$300,000	$375,000	$400,000	$2,500,000
Year 1 Depreciation	$7,000	$8,000	$12,000	$100,000
Year 1-5 - Cumulative Depreciation	$30,000	$32,000	$50,000	$450,000

The maximisation of a depreciation claim on any building requires a combination of construction costing skills and an excellent knowledge of Tax Legislation. This rare combination of skills has resulted in a select number of quantity surveying firms specialising in property depreciation.

Quantity surveyors are recognised by the Australian Taxation Office to be appropriately qualified to estimate building costs for the purpose of depreciation. Your accountant should recommend a specialist to complete such a report, to maximise the depreciation benefits from your property.

Mortgage House would like to thank BMT Tax Depreciation Pty Ltd for this article.

If you are interested in purchasing an investment property, Mortgage House can assist you with the following: