Imagine discovering an extra $11,000 just waiting to be claimed. That’s what BMT Tax Depreciation found for its residential property investors in the 23/24 financial year, thanks to property depreciation deductions. For property investors, a depreciation schedule isn’t just a helpful tool—it can be a game-changer for maximising returns and improving cash flow. Whether you own a brand-new property or an older investment, depreciation deductions can add substantial value to your annual tax return.
Why is Depreciation So Valuable?
Property depreciation refers to the natural wear and tear that occurs to a property and its assets over time. The Australian Taxation Office (ATO) allows property investors to claim deductions on two types of depreciation: capital works deductions (Division 43) and plant and equipment assets (Division 40). These deductions reduce taxable income, boosting cash flow and helping you maximise your property’s potential.
Capital Works Deductions (Division 43)
Division 43 deductions apply to the property’s structure and permanent fixtures, such as walls, roofs, sinks, cabinets, and doors. The ATO provides strict guidelines on eligible deductions, which are calculated over the property’s lifetime. Buildings constructed after 1987 generally qualify, though older properties may also attract deductions if significant renovations have been completed.
Plant and Equipment Assets (Division 40)
Division 40 covers removable or mechanical items, such as appliances, furniture, air conditioners, and carpets. These assets are evaluated individually based on their effective lives, meaning they often depreciate more quickly than structural components. Second-hand properties can qualify for these deductions if items were added after the property became income-producing.
Not Just for New Properties – Older Investments Qualify Too
Many property investors mistakenly believe only new properties qualify for depreciation. This is not true. While newer properties often provide higher deductions due to modern fixtures and standards, older properties still offer significant potential. Changes in legislation in 2017 impacted how second-hand properties qualify, but deductions for capital works and new assets remain available.
Missed Past Claims? It’s Not Too Late
If you haven’t been claiming depreciation on your investment property, you can still recover missed deductions by adjusting past tax returns. The ATO allows you to claim deductions from previous years, improving your financial position. This process is particularly beneficial for long-term property owners who have not maximised their tax benefits. Consulting with a property depreciation specialist ensures you don’t miss out on eligible claims.
The Process is Simple, and the Benefits are Clear
Arranging a depreciation schedule might sound complex, but it’s straightforward with professional assistance. A schedule outlines all eligible deductions for your property over its lifetime, ensuring no opportunities are overlooked. The cost of creating a schedule is also 100% tax-deductible, further increasing its value.
Real Financial Impact for Property Investors
A depreciation schedule significantly boosts cash flow by reducing taxable income. This enables property investors to reinvest in upgrades, manage property expenses, or expand their portfolios. Whether you’re new to property investment or an experienced investor, the financial benefits are clear.
Maximising Your Investment with Professional Guidance
While you can calculate depreciation yourself, working with a property depreciation specialist ensures you claim every eligible deduction. Specialists understand tax regulations, depreciation rates, and ATO requirements, providing detailed and accurate schedules. Their expertise saves you time and ensures you don’t leave money on the table.
Final Thoughts
Including a depreciation schedule in your tax return is one of the smartest ways to maximise returns on your investment property. Whether your property is new or older, the financial benefits are substantial. By reducing taxable income and improving cash flow, depreciation ensures your investment works harder for you.
Don’t leave potential savings on the table. Speak with a depreciation specialist today and take full advantage of this valuable financial tool. Smart investments aren’t just about income—they’re about minimising expenses and optimising every dollar. A depreciation schedule is the key to achieving that balance.
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