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New or old, it does not matter

Owners of both new and old investment properties are entitled to claim depreciation deductions. This can result in thousands of dollars being put back in an investor’s pocket each year, significantly increasing their cash flow.

Property depreciation is a non-cash tax deduction, meaning owners do not need to spend money to be eligible to claim depreciation. Depreciation deductions apply to all income producing properties in two ways. Deductions can be claimed for the depreciation of the building structure via a capital works deduction and for the plant and equipment assets contained within the property.

Investors often wonder about the potential gains from claiming depreciation on older properties compared to new properties. The simple answer is that the owners of new properties will receive higher depreciation deductions as they contain newer fixtures and fittings, meaning the depreciable value of those items is higher. However, all investment properties both new and old can attract substantial depreciation deductions.

The table below shows the difference a depreciation claim can make for the owners of new, old and recently constructed residential house.

BMT_older new

The depreciation deductions in this case study have been calculated using the diminishing value method. The depreciation found within properties of the same price and age can vary significantly depending on the property size and number of plant and equipment assets found in the property. Additional deductions may also apply if there has been any additional works or renovations completed.

As shown above, although the owner of a newer residential property constructed after 2012 will receive much higher depreciation deductions, the owner of an older property constructed in 1980 will still receive considerable deductions.

To find out the likely depreciation deductions available on a current or proposed investment property visit the BMT Tax Depreciation Calculator page by clicking here, or call one of the expert staff on 1300 728 726

Article provided by BMT Tax Depreciation.
Bradley Beer (B. Con. Mgt, AAIQS, MRICS) is the Chief Executive Officer of BMT Tax Depreciation.