Be a Smart Investor – Remember to Claim all You Can

Claim your money back

Investment properties, just like cars, decrease in value over time. So, if a property is used to generate an income, the Australian Taxation Office allows the property owner to claim back the decline in the value of the building. This is done by means of a Tax Deduction. The amount that can be claimed varies, and is based upon the date of the original building construction. It is usually either 2.5% or 4% of the construction cost or the ‘Capital Works Component‘ of the building.

The ATO also recognises that there are several components (i.e. appliances, carpet etc.), that generally have a shorter life span than the main building structure, and because of this they can be used as an accelerated rate of depreciation. These components are grouped into the ‘Plant and Equipment’ division, and are calculated separately to the Capital Works deductions.

There is a common misconception that only new properties are eligible for depreciation. This is not the case. Older properties can also produce attractive returns (generally referring to plant and equipment deductions).

Use Investment Depreciation to Reduce Your Tax

Claiming depreciation on your investment property is a great way to reduce your tax burden, and may help you keep positive cash flow by taking into account the general ‘wear and tear’ of a property. This makes sense because as the property owner, you then have the option to invest this extra money or reduce your loan liabilities.

For further information on the Tax Depreciation of future investment properties purchased through Oaks Property Sales, please contact our office.