What is Tax Depreciation?

Real estate has two parts:R466.gif

  • The land, which is deemed to appreciate; and
  • The Improvements, which are deemed by the Tax Office to depreciate.

If you purchase an asset for the sole purpose of earning an income, then under current legislation you are allowed to claim deductions against your taxable income.

The value of those assets gradually reduces over a period of time as they approach the end of their effective life. Assets, which lose value in this way, are said to depreciate.

In 1982 (commercial) and 1985 (residential) this was adopted to include buildings!

The Improvements component then has two parts:

  • The building and structural Improvements which may qualify for Capital Allowances (depreciating at 2.5% or 4%)
  • The Plant, eg. Floor coverings, window furnishings, fans, air conditioners, stoves, rangehood, hot water system, smoke alarms etc. (these depreciate at varying rates from 5% to 100%).

We at Residep, physically inspect your property, record and itemise every claimable component, apply the appropriate depreciation rate, analyse, calculate and summarise into a 10-12 page Tax Depreciation Schedule.

The report is easy to read. Simply pass it onto your accountant and they use the schedule to claim your tax deductions.

Want to know more?

How does a Residep Schedule best reflect Tax Depreciation and the benefits to you?