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Types of depreciation deductions available

The Australian Taxation Office (ATO) allows property investors to claim depreciation in two ways. These are capital works allowance (division 43) and plant and equipment depreciation (division 40).

Division 43

Also known as capital works allowance or building write-off, division 43 is a deduction investors can claim for the wear and tear that occurs to the structural items of a building. Some examples of assets that can be claimed under this allowance include walls, driveways, doors and windows.

As a general rule, any residential building where construction commenced after the 15th of September 1987 will entitle their owner to capital works deductions at a rate of 2.5 per cent per year for up to forty years.

Owners of older buildings constructed prior to 1987 should still find out what deductions are available. This is because often these buildings have undergone some form of renovation which can result in capital works deductions for the owner, even if renovations were completed by a previous owner.

Division 40

Otherwise known as plant and equipment depreciation, these are classified as easily removable assets found within the property. Some examples of these assets include blinds, lights, air conditioners, carpets and cook-tops.

Unlike structural items, no date restrictions apply when claiming depreciation on plant and equipment assets.  Each asset is assigned an individual effective life set by the ATO and depreciation rate by which depreciation should be calculated.

The Australian Taxation Office (ATO) allows property investors to claim depreciation in two ways. These are capital works allowance (division 43) and plant and equipment depreciation (division 40).

 

Regardless of the age and type of investment property, it is important to enlist a specialist Quantity Surveyor to complete an assessment to ensure all assets are accounted for, ultimately maximising the cash return for the investor.

To learn more about depreciation and the different types of deductions you can claim visit the tax depreciation overview page on the BMT Tax Depreciation’s website. Alternatively, contact The Successful Investor for a referral 1300 800 886 or email us.