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Tax Depreciation on Rental Property

Property Management

The law for tax depreciation on rental property can be very confusing and a lot of property owners had lost a lot of money in claiming tax depreciation claims. There are several problems encountered by property owners like claiming depreciation deduction for things that are not supposedly depreciated and improper assets value claimed for depreciation.

Tax Depreciation on Rental Property

There are two factors that need to be considered once a quantity surveyor finishes a property owner’s tax depreciation claim and capital allowance: Plant & Equipment and Capital Works Allowance.

Capital works allowance is commonly referred to as the building write-off.  It is a deduction offered for structural portion of a building. Not all properties are qualified to claim the allowance; a property owner can claim 2.5% or 4% of the building’s original construction cost depending on the age of the building. Some of the depreciable items under capital works are: doors and windows; driveways and fences.

Plant and equipment on the other hand is a deduction given to removable assets, which are recognised by the ATO legislation as an asset that depreciates quicker than the building. A research made by BMT Tax Depreciation indicates that at least 15% of a construction cost of a residential building is composed of plant and equipment.

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