Buildings decline in value because of ‘tear and wear’ like any other commodities. The decline in value, also known as property ‘Depreciation’, is regarded as loss in your investment cash flow, and will come back to investors’ pocket through Australian taxation mechanism.
Depreciation is a significant component of tax return associated with income producing properties ruled by Australian Taxation Office. Our primary goal is to maximize the return from your investment property within boundary of relevant legislations.
Property depreciation is not once-off deduction from your taxable income. It is ongoing deduction occurs every year in 40 or 25 years from completion of building works depending on different construction time.
All income producing properties attract depreciation. In the following scenarios you may benefit from depreciation of investment properties:
We will estimate construction cost of the building and assess all relevant plant and equipment in line with ATO requirements. New buildings attract huge depreciation in first ten years, which may turn your cash flow into positive gearing.
We use our historical data and costing system to provide construction cost for existing buildings under original market, and assess opening value of plant and equipment based on current market condition and purchase price. Many older buildings still attract generous depreciation.
Renovation or extension
Any renovation or extension can be claimed as deduction, even it is conducted by previous owner. We also provide pre-renovation inspection to determine ‘write off’ residual value before existing assets to be removed.
A tax depreciation estimate indicates potential buyer the depreciation range of a particular property, which may help the buyer forecast cash flow of the investment.
Eligibility to claim Tax Depreciation
Legal owner or joint legal owners of an investment property can claim depreciation. Each person in joint legal ownership can claim deduction based on their share in the asset – for example, based on share of the cost of the asset, and according to their use of the asset.
Tax Depreciation to be prepared by a Quantity Surveyor
A tax depreciation schedule shall be prepared by a qualified Quantity Surveyor as per ATO tax ruling 97/25 for appropriate estimate of the construction costs, where those costs are unknown.