No property is too old to claim depreciation
Sixty one per cent of depreciation schedules prepared by BMT Tax Depreciation are for pre-owned properties. Of these schedules, 33 per cent are properties which were built prior to 1987 and see owners claim an average of $4,042 in annual depreciation deductions in the first five years.
Property depreciation is made up of two elements: capital works deductions and depreciation of plant and equipment. Capital works deductions apply to the structure of the building, including items that cannot be easily removed. Depreciation of plant and equipment is available on mechanical and removable fixtures, including those deemed to have an effective life set by the Australian Taxation Office.
The capital works component is qualified by age. Legislation states that for any residential property which commenced construction prior to 15th of September 1987, the owner will not be able to claim capital works deductions. Depreciation of plant and equipment is not limited by age; it is the condition and quality of each item which contributes to the depreciable amount.
Specialist Quantity Surveyors identify a large proportion of deductions on older properties through plant and equipment depreciation. On average, 15 per cent of the total construction cost of a residential property is made up of plant and equipment. This includes items such as carpet, hot water systems, exhaust fans, blinds and ovens. Plant and equipment items are rarely the same age as the building, usually being replaced or updated over time. The greater amount of plant and equipment items identified, the higher the depreciation claim.
Another part of maximising claims on older properties is identifying any additional works, extensions or refurbishments which have taken place. Even if the work was completed by the previous owner, the new owner can claim capital works deductions for work done after the qualifying dates.
No matter how old an investment property is, it is worth talking to a specialist Quantity Surveyor like BMT Tax Depreciation to find out how much depreciation can be claimed.
Article provided by BMT Tax Depreciation.
Bradley Beer (B. Con. Mgt, AAIQS, MRICS) is the Chief Executive Officer of BMT Tax Depreciation.
Bradley joined BMT in 1998 and as such he has substantial knowledge about property investment supported by expertise in property depreciation and the construction industry.
Bradley is a regular keynote speaker and presenter covering depreciation services on television, radio, at conferences and exhibitions Australia-wide.