How to Pay Less Tax on Your Investment Property

Just like you claim depreciation on car or machinery for reducing the tax, you can also claim property tax depreciation on your investment property to reduce your taxable income. Any person who purchases a property for residential or commercial purposes can claim depreciation on the property purchased.

According to ATO (Australian Tax Office), depreciation means the decrease in the value of an asset over time. Therefore, even if the value of the property is appreciated from an accounting point of view, ATO believes that the building or asset will wear out over time and diminish in value. Unlike other expenses, you don’t incur any cost during the year but you still can calculate depreciation and claim a deduction accordingly.

What is Property Depreciation Schedule?

A property depreciation schedule is a comprehensive report that outlines the cost of the property and calculates the annual depreciation value due to wear and tear. The depreciation schedule contains aspects like asset values of every individual item, separation of capital investments and renovations, forecasted deductions, graphing of results obtained by depreciation calculation methods, and so on. To ensure the compliance with ATO during the audit, you must get these deductions assessed correctly. This property depreciation schedule needs to be made for both types of property – residential as well as commercial.

The House Depreciation Report

The eligible residential investment properties under ATO compliance for preparing depreciation reports are Houses, Villas, Granny flats, Townhouses, Units, and apartments. For all these residential properties, a house depreciation report is made to correctly calculate the depreciation deduction on your taxable income. This report is essential as it helps optimize the after-tax returns on investments made by you. Your accountant cannot calculate the asset depreciation though. You have to appoint a qualified quantity surveyor for the task.

The Property Depreciation Report

In an investment property, two types of depreciation can be claimed – one on the building and one on plant and equipment. The construction cost incurred on a building itself can be depreciated before calculating taxable income. Additionally, the items inside the building from machines, carpets, and lightings to dishwashers and ovens, all have depreciation. The depreciation can be claimed even when the property has been renovated. To claim the depreciation value correctly, you need to get an investment property depreciation schedule made. The schedule needs to be made by a surveyor to correctly calculate the value of depreciation and the amount of deduction to be claimed.


While calculating the depreciation on investment property and coming up with the amount of deduction, two methods of calculation are used. A quantity surveyor assesses the value of construction work and creates a depreciation report. When you send this report to your accountant, he or she will calculate property tax depreciation and claim on your tax return. However, it should be noted that all quantity surveyors are not the same. Some are better than others. That is why it is important to choose your surveyor wisely and claim as much deduction on your investment property as you deserve.

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