A Primer on Tax Deductions on Property Depreciation

So, you are planning to buy a house, or have just bought one. Congratulations!! If you already own a residential property, then you should be happy too – the reason being that a residential house need not mean only expenses. A property purchase entails initial expense during the purchase and also subsequent expenses afterward. While those can’t be avoided, there is a silver lining. The effective yield on investment property can be increased with the help of the depreciation rules of the Australian Tax Office (ATO).

The implication of depreciation on residential property

Depreciation is a standard accounting practice. The value of any physical asset is said to reduce over time owing to regular wear and tear. Accounting standards lay down different ways of calculating this reduction in asset value. The same principle holds true for residential properties. There are several ways of calculating depreciation amounts. As a result, the value of the property goes down every year. But the good news is that this depreciation amount can be used by the owner to claim tax deductions.

The Basics of claiming property deductions

The next question is how to go about claiming this tax deduction. A federal tax depreciation schedule property report needs to be prepared. This would be submitted along with your regular tax return. There are two broad kinds of assets on which such depreciation can be claimed. The first is the fixed assets or capital assets of the property. They fall under Division 43 (Capital Works). The second is the depreciation on plant and equipment. This refers to the movable assets installed on the property, and could even include air conditioners or upholstery. These fall under Division 40 (Plant and Equipment). Based on the complete asset list prepared by a professional, the depreciation amount would be calculated. The amount deductible from the tax payable would then be calculated from this.

Preparing the Depreciation Schedule

In the previous paragraph, we spoke about the importance of preparing tax depreciation schedules in order to claim tax breaks. While it might sound like a simple listing of all assets on your property, it is not so easy. For example, different asset classes have different depreciation rates recommended by ATO. It is not possible for you to know all of those. This is why it is recommended that you utilise the services of a trained and experienced professional. Most property owners take the help of a certified quantity surveyor to help prepare their tax depreciation schedules.


This was a very brief introduction to the tax implications of standard property depreciation. But there are several nuances in the regulations, and once in a while, there are modifications in the rules too. A certified quantity surveyor can interpret the tax depreciation tables 2015 in the best way possible. This ensures that you do not claim the same depreciation twice. It also ensures that you do not pay more tax than necessary. If done right, the depreciation schedule for your property can take a good chunk off your tax liability.

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