What is Tax Depreciation and How Can It Save Investors Money?

Depreciation is a tax deduction claimable for the natural wear and tear of your building and assets over time, as they get older. The Australian Taxation Office (ATO) allows owners of income producing properties to claim this depreciation as a tax deduction. Unlike other deductions, such as interest on a loan, where you need to outlay money in order to make a claim. Depreciation is considered a non-cash tax deduction. It is the second largest deduction you can claim in your tax return and very important if you want to maximise your tax deductions and any income tax refund.

To go into more detail, we must first understand that the depreciation legislation as found in the Income Tax Act 1997 consists of two important sections; Division 40 plant and equipment and Division 43 Building and structure. In addition to this we need to also consider the current Tax Rulings which change frequently. These Tax Rulings include the effective life on thousands of assets in every property type you can think of from Residential property to Mining and Healthcare.

Tax depreciation is a complex field, and whilst I can explain more about these 2 legislation sections in a lengthy video, we would rather encourage clients to give one of our Quantity Surveyors for a personal service. They will ask a series of questions to establish the property type, circumstances to ensure you get the best possible outcome.

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