(03) 9830 0898 Suite 6, 400 Canterbury Road Surrey Hills VIC 3127

Tax Depreciation

What is Tax Depreciation?

 
Buildings decline in value because of 'tear and wear' like any other commodities. The decline in value, also known as property 'Depreciation', is regarded as loss in your investment cash flow, and will come back to investors' pocket through Australian taxation mechanism.
 
Depreciation is a significant  component of tax return associated with income producing properties ruled by Australian Taxation Office. Our primary goal is to maximise the return from your investment property within boundary of relevant legislations.
 
Property depreciation is not once-off deduction from your taxable income. It is ongoing deduction occurs every year in 40 or 25 years from completion of building works depending on different construction time.
 

What property attracts depreciation?

 
Basically, all investment properties attract depreciation. In the following scenarios you may benefit from depreciation of investment properties:
 
  • New Buildings
We will estimate construction cost of the building and assess all relevant plant and equipment in line with ATO requirements. New buildings attract huge depreciation in first five years, which may turn your cash flow into positive gearing. 
 
 
 
 
  • Older Buildings
We use our historical data and costing system to provide construction cost for existing buildings under original market, and assess opening value of plant and equipment based on current market condition and purchase price. Most older buildings still attract generous depreciation.
 
 
 
 
  • Renovation of old buildings
Any renovation or extension can be claimed as deduction, even it is conducted by previous owner. We also provide pre-renovation inspection to determine 'write off' residual value before existing assets to be removed.
 
 
 
 
 
  • off-the-plan / Pre-purchase
A tax depreciation estimate indicates potential buyer the depreciation range of a particular property, which may help the buyer forecast cash flow of the investment.
 
 
 
 
 
 

Who is eligible to claim Tax Depreciation?

 
Legal owner or joint legal owners of an investment property can claim depreciation. Each person in joint legal ownership can claim deduction based on their share in the asset - for example, based on share of the cost of the asset, and according to their use of the asset.
 

How does Tax Depreciation work?

 
Tax Depreciation comprises two types of deductions:
 
Capital Allowances & Depreciating Assets.
 
Capital allowances refer to building structure and improvement. Capital works depreciates on 2.5% or 4% per year depending on year of construction and type of buildings. Click here for time chart to different types of buildings.
 
Depreciation on assets (plant & equipment) is based on curtain depreciating rate determined by their effective life which is regulated and reviewed by ATO.
 
Residential buildings constructed prior to 18 July 1985 are no longer eligible for capital allowances deduction, however, plant and equipment and all improvement after 27 Feburary1992 still attract substantial deduction.
 
The chart below illustrates basic tax depreciation structure:

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Example of depreciation for different types of properties

 
The amount of property depreciation highly depends on type and age of building. Based on diminishing value method, median deductions of some typical new buildings in average Melbourne suburbs are shown below:
 

 

Building Type

Purchase Price

First Full Year Depreciation

First 5 Year Depreciation

1 bed apartment

$350,000

$8,000

$35,000

2 bed apartment

$500,000

$12,000

$55,000

3 bed apartment

$650,000

$14,000

$65,000

Townhouse

$500,000

$12,000

$55,000

House

$700,000

$16,000

$75,000

Office suite

$400,000

$8,500

$39,000

Retail shop

$600,000

$15,000

$70,000

Warehouse

$1,800,000

$80,000

$360,000

 

Who prepares Tax Depreciation?


A tax depreciation schedule shall be prepared by a qualified Quantity Surveyor as per ATO tax ruling 97/25 for appropriate estimate of the construction costs, where those costs are unknown.
 
Our depreciation schedule always includes both Diminishing Value and Prime Cost method for depreciating assets, which allows you to maximize your tax return based on your investment time frame.
 
Our fee for tax depreciation schedule is 100% immediate tax deductible.
 
Our money back guarantee ensures your depreciation for first full year will be twice more than our fee or your report is free. This is more important for older buildings depreciation.
 

Request a quote for ATR Depreciation

We offer free obligation tax depreciation quote if you can provide following basic information: