There are many and varied items you can claim depreciation on in your investment property.
Not all of them expected – or glamorous. Garbage bins, for example, are a common household item that is often overlooked by homeowners.
But they’re not the only items people often overlook, with up to 80 per cent of investors failing to take advantage of property depreciation, according to quantity surveyor and CEO of BMT Tax Depreciation, Bradley Beer.
“On average, investors can claim $8212 in depreciation deductions in the first full financial year alone,” he said.
Legislative changes following the 2017 Budget have ruled out depreciation claims for pre-existing plant and equipment items in established properties purchased after May 9, 2017. However, purchasers of new properties can still benefit, and depreciation can be claimed on eligible new items, regardless of when the property was purchased.
The Australian Taxation Office currently lists more than 100 depreciable plant and equipment items for residential properties, including hot water systems, air conditioners, blinds, ovens, carpet, smoke alarms and garden sheds. These are things beyond the home’s bricks and mortar, replaced within a relatively short period.
In an average household, carpet that cost $3650 could attract a first-year deduction of $730, while carpet in an average two-bedroom apartment that cost $2180 could attract a $436 deduction, Mr Beer said.
Owners can also claim depreciation on existing bricks and mortar and any structural improvements, such as new roofs, kitchens and bathrooms. But unlike depreciation rates for plant and equipment items, which vary according to their lifespan, capital improvements are depreciated at 2.5 per cent a year for 40 years for a residential property.
“Many property investors choose not to seek expert advice and will self-assess deductions, putting themselves at risk of an ATO audit,” Mr Beer said.
“It’s important to seek advice from an expert such as a quantity surveyor to calculate the cost of items for the purpose of tax depreciation.”