The Principles of Depreciation

What is Tax Depreciation?

In 1985, the Federal Government introduced a new tax legislation allowing property investors to claim legitimate tax deductions based on a properties' effective life of depreciation.

In layman's terms, property tax depreciation refers to the annual wear and tear of a building and its fixtures. As a building ages it wears out, in accounting terms it depreciates in value. This loss in value can be claimed as annual tax deduction by any tax payer who owns an income producing property - be it residential, commercial, industrial, health or educational. All property investors should have a property deprecation tax schedule on their investment properties.

What is a Property Tax Depreciation Schedule?

A Property Tax Depreciation Schedule is an ATO compliant schedule, covering depreciation over the LIFETIME of the property. Our online depreciation schedules will highlight all self assessed items of plant and equipment and any capital allowance costs that can be depreciated. The deductions can be claimed in two different categories:

Capital Allowance (Referred to as Division 43)

Capital allowance deductions are based on the historical construction cost of a property, which may include surveying, engineering, architectural and building fees. This cost does not include the land acquisition and site preparation. For residential properties the property must have a construction completion date after 18 July 1985.

Plant & Equipment (Referred to as Division 42)

Plant and Equipment Assets are depreciable at a higher rate than that of the capital allowance. Assets within this class are predefined by ATO legislation and the rate is the Commissioners interpretation of the effective life of the asset to produce and assessable income.

About is one of Australia's fastest growing professional Quantity Surveying firms, run solely by highly qualified professional and experienced Quantity Surveyors, with over 20 years experience in the field of Property Tax Depreciation schedules.

For More information on tax depreciation refer to the ATO's Guide for Rental Property Owners 2011 or order a depreciation report today.

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