Tax Depreciation on Older Investment Properties

Tax depreciation on older investment rental properties is usually less than newer properties for two reasons:

1. As depreciation is based on the original cost of construction of an investment property a newer house will always produce a better tax result.

2. Tax deprecation on investment properties constructed prior to 17 July 1985 are further limited as property investors can not claim tax depreciation on "capital works" (cost of construction of the building).

In the case of older investment properties, it is worth noting that a capital allowance and depreciation report covers not only the capital works allowance but depreciation of plant, equipment and fittings as well. This means that all properties that obtain an income by way of rent should be eligible to claim a deduction for the plant, equipment and fittings contained within the property.

Types of plant, equipment and fittings that can be claimed.

The following is a list of typical items that are depreciable:

Hot water service; ceiling fans; cook tops; ovens; micro waves; vinyl floor covers, carpet dishwasher, floating timber floors, range hood, clothes dryer, binds, smoke alarms, freestanding spar, exhaust fans, air conditioner, curtains, washing machine, light fittings and security alarm.

If you own an older investment property we recommend you consult with a quantity surveyor about the potential for additional tax deprecation expenses.

This may be particularly important where an older investment property has had renovations. For investors who intend renovating an older investment property we also recommend consulting a quantity surveyor before renovations start. In doing so, the quantity surveyor can identify not only additional capital costs after the renovation but can also identify costs associated with plant,, equipment and fittings that have been scrapped and therefore written off as a tax deduction.

Our experience is that costs associated with preparation of a tax depreciation schedule for an older investment property will easily be recovered in tax benefits. Many quantity surveyors will offer a guaranteed on tax savings before engaging their services.

By David Maynard

CEO - My Tax Zone

Copyright 2014. My Tax Zone.