Property Depreciation Schedule's help you Pay Less Tax and help your investment property become Cashflow Positive

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Pay Less Tax using Property Depreciation Schedule

Written by Darryl Simms, first published in LinkedIn Pulse

What is Property Depreciation?

Owners of income producing properties are permitted to claim tax depreciation every year when completing their tax return. The depreciation claimed is based on the decline in value of certain items in the property.

There are two types of depreciation allowances, Capital Works Allowance (Division 43) and Plant and Equipment (Division 40).

Capital Works (Building Allowance) Allowance refers to the construction costs of the building and covers things like concrete, brickwork, baths, sinks, basins, toilet bowls, fences, driveways and built in cupboards.
Plant and Equipment refers to items within the building such as blinds, curtains, light fittings, hot water services, solar panels and carpet to mention a few.

Both types of allowances can be claimed against your taxable income. Different items within an investment property will have varying rates of depreciation, which are determined by the effective life of the item.

Benefits of Property Depreciation

In simple terms, your property depreciation schedule allows you to Pay Less Tax. Getting your Accountant to use a Tax Depreciation Schedule at tax time allows you to claim extra tax benefits, which can amount to several thousand dollars.

How it works

Whatever dollar amount the depreciation schedule allows you to claim means you are reducing your taxable income (on paper) by this same amount. Sometimes this can also bring you down into a lower tax threshold and therefore deliver even more tax benefits to you (ie you pay less tax).

Increased Depreciation on new properties

New properties deliver much greater tax depreciation benefits which means your ongoing contribution to support the investment property will be greatly reduced.

Often this will allow your investment property to become cash flow positive after rental income and other tax benefits have been factored in.

More about property depreciation

Learn how to pay less tax using property depreciation with our detailed 3 page download below.

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