Maximising tax benefits on your investment property involves understanding the various deductions and strategies that can help reduce your taxable income. Here are four reasons why it is essential to obtain a tax Depreciation Schedule for your investment property.

1. Tax Depreciation Schedule Should Be Included in Every Property Investor’s Annual Tax Return

2. New and second-hand properties are eligible for depreciation

3. It is never too late to claim depreciation on your investment property

4. The Tax Depreciation Schedule fee is 100 per cent tax-deductible.

1. A Depreciation Schedule Should Be Included in Every Property Investor’s Annual Tax Return

An essential part of annual preparation for property investors includes re-visiting finances and finding ways to improve cash flow. Claiming property depreciation deductions on your investment property may be the answer.

Property depreciation is the natural wear and tear that occurs to a property and its assets over time. The Australian Taxation Office allows investors to claim Division 43 capital works deductions on the structure of the building and permanent assets within it, calculated over the life of the property. Depreciation for Division 40 plant and equipment assets that are easily removable or mechanical in nature, is based on their individual effective lives.  

In the 23/24 financial year, BMT found its residential property investors more than $11,000 in first full financial year deductions alone. By claiming property depreciation, you reduce your taxable income and can benefit from receiving more in your annual tax return.

2. New and second-hand properties are eligible for depreciation

Some investors think their investment property is too old to attract depreciation deductions; however, this is untrue. Both new and old properties will provide some depreciation deductions for their owners.

In November 2017, the federal government changed how investors claim depreciation for plant and equipment assets. If you exchanged contracts on a second-hand residential investment property after 7:30 pm on 9 May 2017, you can no longer claim depreciation for any previously used plant and equipment assets.

However, you can still claim depreciation for any brand-new assets installed once the property is income-producing. You can also claim qualifying capital works deductions relating to the building’s structure and any items permanently fixed to the property. These deductions typically comprise between 85 and 90 per cent of a total depreciation claim.

3. It is never too late to claim depreciation on your investment property

If you haven’t been claiming or maximising depreciation for your investment property, previous tax returns can be adjusted and claimed back. This means you can recoup missed deductions from past years, improving your overall financial position.

It is always advisable to consult with a property depreciation specialist like BMT Tax Depreciation to ensure that you take advantage of any potential depreciation deductions on your investment property.

4. The Tax Depreciation Schedule fee is 100 per cent tax-deductible.

Although arranging a depreciation schedule involves a cost, the fee is 100% tax deductible. This means you can claim the cost of the depreciation schedule in the year it is incurred, further reducing your taxable income.

Ordering a depreciation schedule can provide significant financial benefits for property investors, regardless of the property's age. By taking advantage of depreciation deductions, you can improve your cash flow, adjust previous tax returns, and ensure that your investment works as hard as possible. Don’t overlook this valuable opportunity to enhance your financial returns in the coming year.

BMT Tax Depreciation is Australia’s leading residential and commercial tax depreciation schedule supplier. For more information on the benefits of property depreciation, contact us at 1300 728 726 or request a quote.

Bradley Beer (B. Con. Mgt, AAIQS, MRICS, AVAA) is the Chief Executive Officer of BMT Tax Depreciation.  Please contact 1300 728 726 or visit bmtqs.com.au for Australia-wide service.

The information in this article is of general use only and should not be used as a quote or advice. BMT recommend consulting an accountant before making financial decisions. Contact BMT for a specialised tax depreciation schedule.

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