We invest in property because it’s a good financial decision. Once we have done the research and bought the property in what is forecast to be a high capital growth, high rental demand location, our next step is to manage the property well.
Hiring a good property manager is the first step to achieving this goal, but there are other things you need to do to make sure you make full use of the tax benefits of owning an investment property.
A Depreciation Schedule is one of those things.
A Depreciation Schedule helps to ensure that you are maximising the cash return from your investment property each financial year. It will include deductions for both capital works and the plant and equipment depreciating assets over the ATO specified lifetime of the property – which is 40 years.
Depreciation is usually the second largest tax deduction available to property investors, after interest rate payments, so it’s a necessary part of the equation.
The depreciation benefit you can claim varies depending on the purchase price, the type of building, its age and fitout, but for the first year you could claim around $13,000 on a three bedroom apartment with a purchase price of $450,000. Cumulative depreciation for year 1 to 5 on this example would be $57,000.
It’s important to note that every property is different and you need to have a Depreciation Schedule prepared for your property by a qualified Quantity Surveyor.
Remember, property investing is about making the numbers work for you. The investment, the income, the expenses and the deductions.
If you don’t have a Depreciation Schedule on your property, get one. If you need a recommendation for a Quantity Surveyor, please get in touch.
If you want to discuss your investing or wealth creation strategy, we’re always happy to help!