Maximising Tax Benefits on Your Investment Property

For property investors, tax season is a prime opportunity to revisit financial strategies and improve cash flow. One of the most effective ways to reduce taxable income and boost your annual tax return is by claiming property depreciation deductions. Depreciation is the natural wear and tear on your investment property and its assets, and it’s a benefit that many investors overlook.

What is Property Depreciation?

Depreciation is calculated on two key components of an investment property:

• Division 43 Capital Works: Depreciation on the building’s structure and any permanent assets within it. This is spread over the life of the property.
• Division 40 Plant and Equipment: Depreciation for removable or mechanical assets, based on their individual effective lives.

In the 2023/24 financial year, BMT Tax Depreciation reported helping residential property investors claim more than $11,000 in first-year deductions alone. By incorporating property depreciation, investors can reduce their taxable income and increase their tax return.

Depreciation Benefits for Both New and Older Properties

Many investors assume that older properties won’t qualify for depreciation, but this is not the case. Both new and second-hand properties are eligible for deductions.

There was a change in November 2017 that affects how depreciation claims are handled for second-hand properties. If you purchased a second-hand residential investment property after 7:30 PM on May 9, 2017, you can no longer claim depreciation for plant and equipment assets that have already been used. However, depreciation can still be claimed for newly installed assets and for capital works relating to the property’s structure and permanent fixtures.

It’s Never Too Late to Claim Depreciation

Even if you haven’t been claiming depreciation in previous years, it’s not too late to adjust your past tax returns. Retroactive claims can help you recover missed deductions and strengthen your financial position. Consult a property depreciation expert to ensure you’re claiming everything you’re entitled to.

The Cost of a Depreciation Schedule is Fully Tax Deductible

While there is a cost for arranging a depreciation schedule, the good news is that the fee is 100% tax deductible. This means the expense can be claimed in the same year, reducing your taxable income even further.

Maximise Your Investment Potential

By claiming depreciation deductions, investors can enhance their cash flow, adjust previous returns, and ensure their property is working harder for them. Don’t miss out on this opportunity to maximise your financial returns.

For more information or to get a quote for a depreciation schedule, contact BMT Tax Depreciation at 1300 728 726 or visit their website.

Source: BMT Tax Depreciation