Tax depreciation is a valuable tool for property investors, helping to maximize deductions and improve cash flow. However, many investors overlook key details when claiming depreciation on their properties. At Laguna Real Estate our Property Management Team are well versed on Tax Depreciation and we encourage our landlords to understand and implement this essential tool to maximise on their property investment.
Here are five important things you need to know about Tax Depreciation:
1. It’s Not Just for New Properties
A common misconception is that only owners of new properties can claim depreciation. While the building’s age may affect the overall deductions, older properties can still be eligible. It’s always worth consulting a specialist to see if a depreciation schedule can be prepared for your investment.
2. Two Key Components of a Depreciation Claim
Depreciation claims are made up of two main components:
- Capital Works Allowance – Covers structural elements like walls, doors, roofs, and tiles.
- Plant & Equipment Depreciation – Applies to removable or mechanical assets such as carpets, blinds, and appliances.
Keep in mind that legislative changes introduced on May 9, 2017, prevent investors from claiming depreciation on second-hand plant and equipment assets in residential properties. However, owners of newly built properties can still claim these deductions.
3. Capital Works Deductions Are Still Available for Older Properties
Even if your property isn’t brand new, you may still be able to claim capital works deductions. The ATO allows claims for residential properties constructed after September 15, 1987, and commercial buildings built after July 20, 1982.
4. Plant & Equipment Depreciation Resets at Settlement
Unlike capital works, depreciation for plant and equipment assets is based on their effective life, which resets from the date of settlement. Even in older properties, renovations or upgrades by previous owners may provide new depreciation opportunities.
5. Renovations Can Still Offer Depreciation Benefits
If work has been done on a property—whether by you or a previous owner—you may be entitled to depreciation deductions. As long as the renovations fall within the ATO’s legislated dates, you can claim the remaining value of the improvements.
At Laguna Real Estate we use Real Property Matters to help with any depreciation enquiries our landlords may have.
