Why you shouldn’t discount depreciation deductions at tax time

“Every day we hear investors saying that they think their property is too old to carry depreciation deductions. But depreciation is available on almost all investment properties regardless of age,” said Mr Beer.

There are two types of depreciation deductions landlords can make.

The first is on capital works, which make up approximately 85 to 90 per cent of a landlord’s claims. Capital works relate to a property’s structure and permanently fixed items, such as kitchen cupboards, doors and sinks.

According to BMT, these works are able to be claimed for up to 40 years but are dependent on the type of construction and date the work commenced.

The second type of depreciation deduction is on plant and equipment, the easily removable items in a property, such as carpets and blinds. There is a limited effective life for these assets, established by the Australian Taxation Office (ATO), but BMT advises that investors are still able to claim deductions for more than 6,000 ATO-recognised plant and equipment assets.

However, there was a catch here, Mr Beer stated. Depreciation on plant and equipment cannot be claimed in second-hand properties unless an asset is brand new.

With so much potential for confusion, he advised that any time an update is made to a property, it is best for the landlord to contact a depreciation schedule provider.

“We hear clients say all the time, ‘I haven’t made any major renovations so it’s probably not worth it’,” he said.

“There are definitely opportunities to claim that people don’t think about – some of those little things that you’re doing every few years can add up.”

Whether a property was either constructed decades ago or purchased second-hand after 2017, when legislation changes came into effect, Mr Beer believes it is still critical to contact a tax depreciation specialist. These buildings have very often undergone a renovation that can result in either of the two tax depreciation deductions being claimed.