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This is a really common question and the short answer is no, you can claim depreciation on all investment properties. It’s amazing how many people we speak to who have bought even 10 or 15 year old investment properties and they think the properties are too old to make depreciation claims.Investment property depreciation is divided into two portions, Building Allowance which is generally deemed to be the structure of the building eg (walls, slab and roof etc.) and Plant and Equipment which is deemed to be items attached to the structure eg (appliances, carpets, blinds etc.)
Building Allowance on residential investment properties is claimable if it was built after 16th September 1987 and is calculated at 2.5% of the original construction costs over a 40 year period.
Plant and Equipment items are claimed at varying rates eg under $300 at 100%, under $1000 at 37.5%, and air conditioners over 10 years etc. You can also claim a portion of common area items when part of strata buildings eg; gym equipment, elevators and fire services.
An easy way to see if your investment property qualifies for depreciation claims is to use the Washington Brown Tax Depreciation Calculator.
- Simply enter a few details about the property,
- Then click Calculate
The important thing to remember with older investment properties built prior to 16th September 1987 is that most of the plant and equipment claims will be completely depreciated after 5 years of ownership.
Investment properties start depreciating from your settlement date, so if you have owned the property for a long period of time, or it was owner occupied anytime during this period it is important you speak to a Quantity Surveyor like Washington Brown to ensure it is worthwhile for you to have a report prepared.
Growth in renovations
I’m not sure if it’s due to the prevalence of reality renovation TV shows like The Block and Selling Houses Australia, changing interior design taste, or a change in tenant’s expectations of what landlords should provide as standard, however in recent years we have seen an explosion in the amount of depreciation reports we prepare on investment properties which include substantial renovations. More and more we are preparing property depreciation reports for investors where we encounter not just one renovation but renovations from 3-4 different time periods.
What’s amazing about this trend is how many investors aren’t aware that they can make claims on previous owner’s renovations as well as any they undertake themselves. If you think your property may have been renovated at some time in the past then your local council planning department may be able to assist with details of past development applications.
This is where utilising the expertise of a full service Quantity Surveying firm who if the original building costs aren’t available will conduct a site inspection to estimate the renovation costs and time frames they occurred. Identifying and apportioning these depreciation claims can really add up and make a substantial difference to investor’s cash flow.
If you do renovate an investment property yourself it’s important that you keep good records of your expenses as the ATO guidelines state that where the original costs are known then they should be used.
Once again if you are unsure of what to do, contact a property depreciation specialist like Washington Brown Quantity Surveyors to discuss your scenario and they will be willing to provide advice on the best way for you to move forward.
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.
