Why property investors should appreciate depreciation at tax time

At tax time it pays dividends if you’re an investor to spend a little time learning the financial arts of being a landlord. It can be a significant benefit to understand the principles of depreciation and capitalisation and write-offs. This won’t make you an accountant, of course, but it will provide insight into how to maximise the benefits that governments offer to ensure there’s always a rental stock of homes available.

As experienced local agents, we always recommend our investors use two professional services – an accountant or financial adviser together with their property management team to ensure you receive the best possible guidance to maximise the return of your investment property.

We often receive questions from first-time property investors about some aspects of the tax regime. So, here’s a short list that addresses questions around depreciation.

Depreciation

Generally, when you buy a significant item for a rental home, such as a hot water service or cooker, you cannot immediately deduct these capital assets. Instead, the deduction is made over time to reflect the asset’s depreciation in value. The purchase should have a limited life, and its value should decline over time.

Deductions

A deduction is made relevant to its capacity to earn income. So if you rent a holiday home 60% of the time, and you live in it for the other 40%, you’ll only be able to make a 60% claim. Deductions can be made for expenses but they should ideally be under a maximum of $300 in most instances or they may be regarded as a capital expense and require depreciation. Deductions are likely to be able to be made for items such as property management fees, pest control, repairs and maintenance and insurances.

Who can claim?

For most scenarios, the legal owner(s) will gain the benefit, but there are exceptions. If you own a property in a formalised partnership, then it is this entity that will get the benefit, not the individuals who formed the association.  

Instant asset write-off

The Federal Government has released this “instant write-off” program to stimulate spending in the economy. Seek more information from the ATO or your accountant as this is quite detailed.

In all circumstances, you should seek professional advice from your accountant or advisor before buying an investment property or expanding your portfolio. This article is for general purposes only and does not constitute professional advice.

Want to learn more about what else you can claim on your investment property to make it as profitable as possible? Our team are on a mission to help people make money through property. So, whether you’re renting out your first investment property or your fifth, we are all over what it takes to get your investment in tip-top shape.

How healthy is your investment property?

1. Take the 4-minute Property Health Check Survey
2. Get your instant property health score
3. We’ll provide investment performance action items.

Take the health check now >

Should I buy or sell first?

You might be surprised to learn that if you understand the process, one approach outweighs the other in terms of flexibility, time, and peace of mind if you meet the criteria.

Find out more about the process >

After more information on any of the topics?

Get in touch with us. We’ll get one of our team to contact you and answer any questions on the key info from the event.

Contact Us >

Does your property manager cover your costs when you are out of pocket? We do!

We’re not like any other property management business in Canberra. Our 4 guarantees cover you (and your costs) when it matters most. 

Want to know more about our guarantees and learn what else we do to maximise your returns? Book a Southside or Northside consultation depending on where you want us to meet you.

We guarantee you won’t regret it.

Quick Action Investor Checklist.

Is your investment property getting the care and attention it deserves? If not, we're here to help. Download our quick action investor checklist today to see if you are getting the most out of your investment property.

Download the checklist >

Let's talk

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.