Property Investing Depreciation Tactics | The Researcher

Investment Property Depreciation Secrets

Last updated:

A surprising number of investors lose money each year by not having a complete understanding of the tax benefits available to them as part of their Investment Property’s depreciation.

Whilst I’m not sure if it’s technically a secret if it’s publically available information the fact of the matter is property investors, especially those on the newer side are not getting the most out of their property thanks to not knowing the full investment property depreciation claims available to them. But don’t panic, as always, us good folk here at the Researcher are here to keep you informed.

What Is Investment Property Depreciation?

Investment Property depreciation is something every investor should have a complete understanding of. Depreciation has the potential to put thousands of dollars back in your pocket, so it is certainly worth knowing about. 

Legally in Australia, owners of investment properties can claim tax deductions on the decline of a building’s structural value, items permanently fixed to the property or plant and equipment assets found within. 

Many investors especially when starting out are not aware that the same wear and tear rules that apply to work equipment and vehicles apply to your investment property. You don’t even need receipts for this kind of claim as there are pre-existing rules about how and what you can claim.

How Do You Calculate Depreciation?

Depreciation applies to both brand new and existing properties with the understanding that a property has a 40-year recommended lifespan.  to count surveyor who calculating the cost of the build. a full breakdown of construction costs including everything from ovens, dishwashers, fridges and even the bricks and concrete, itemising each cost so you can work out how much you can claim for every individual item.

Upon receiving the surveyors report your accountant will be able to strip the costs from your taxable income in the applicable financial year.  So say for 2017/18 and you can claim $7,000 and you’re on the highest marginal rate of 47% you will receive a net return of over $3,000. This makes it obvious how important understanding investment property depreciation really is.

Example Investment Property Depreciation for a brand new build.
Minimum Depriciation based on Marginal Tax Rate of 37% on a $200,000 build. Credit BMT Tax Depreciation

What Properties Are Eligible?

Any residential property that is less than 40 years old is eligible for a claim.  Properties over that age can only claim on plant and equipment. The younger a property, the more you can claim which is often an attraction to buying new. 

How Much Does An Investment Property Depreciation Schedule Cost?

The cost of a tax depreciation schedule will depend on multiple factors including the type, location and size of your property. The majority of surveyors offer a money back guarantee if the result of the survey doesn’t meet an agreed upon saving.

Therefore, obtaining a depreciation schedule becomes a bit of a no brainer and to make it even more appealing surveyor fees are entirely tax deductible. Average costs are between $400 to $800.

Don’t worry though, thanks to the power of the internet you don’t have to commit blindly. This is a great calculator that will give you a fair idea where you stand before you jump in.

If you are in the market for your next property Market Anaylst Martin North recently revealed his picks for 2020 and as always remember, the more you know the better you’ll go!