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FREQUENTLY ASKED QUESTIONS

What is Property Depreciation?

According to the regulations of Australian Tax Office (ATO), you are eligible to claim back two types of allowances on your property: depreciation on Plant and Equipment (Division 40) and depreciation on Capital Works (Division 43) for residential properties constructed after 1985.


Why should I get a Tax Depreciation Report?

As an investor, a Tax Depreciation Report helps you reduce your taxable income. The Report gives a year by year figure that you can claim from your Property Depreciation. By claiming these deductions, you can significantly enhance your cash return from your investment property and generate a more positive cashflow.

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What can I claim with the report?

If you own a residential property which underwent contract before 7pm on May 9th 2017 and it was used an investment property during the 2016/2017 financial year, then you are able to claim for both Division 40 and Division 43 depreciation.

If you own a residential property, which underwent contract after 7pm on May 9th 2017, you are eligible to claim depreciation on Division 40 items within the property only if the property is purchased as brand new and you have not lived in the property. Otherwise, you are only eligible to claim for Division 43 depreciation.

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What is Division 40?

Division 40 refers to the Plant and Equipment items, made up of fixtures and fittings. These items are usually easily removable assets. Each item has an effective life (measured in years) which is determined by the ATO within the document ‘Taxation Ruling TR 2019/5 – Income tax: effective life of depreciation assets’. 

Examples of Division 40 items include:

  • Air Conditioning units

  • Window blinds

  • Ovens

  • Bathroom accessories

  • Light fittings

  • Exhaust fans


What is Division 43?

Division 43 (Capital Works) refers to the physical structure of the building, these are usually irremovable items. Division 43 are also known as Building Write-Off or Capital Works Allowance. Residential properties built after the 15th September 1987 are eligible to claim capital works deductions over a 40-year period which will be depreciated as a straight line at 2.5% per annum. When the construction costs are unknown, a Quantity Surveyor will be responsible for estimating the building.

Examples of Division 43 items include:

  • Driveways

  • Fencing

  • Joinery

  • Roofing

  • Tiling

  • Walls

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Can my accountant prepare my report?

The ATO has appointed Quantity Surveyors to estimate the construction costs of a property and prepare Tax Depreciation Reports. While your accountant is an expert in the accounting side of things, but unless they have the experience and qualification in construction, you will generally be better off relying on an Quantity Surveyor to accurately estimate the construction cost of your property.

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When is the best time to get my Tax Depreciation Report?

The best time to get your Tax Depreciation Report will ideally be after settlement. The next best time is as soon as you know the date that your property is available for lease. It is always best to do the report as soon as possible once you have these details to ensure you are not missing out on any of the depreciating items.


I've lived in the property, can I still claim for the deductions?

Don’t fall to the trap that many falls into by thinking that you aren’t entitled to any claim if you've ever lived in the property. If at any point you switch the property usage from a home to an investment property, as soon as it is leased out you are entitled to start claiming your deductions.

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Is my property too old for claiming deductions?

The ATO allows you to claim both Division 40 and Division 43 depreciation on all residential investment properties built after September 1987. However, most older properties has been renovated over the years and you are able to claim deductions based on the renovation works. It is our job as Quantity Surveyors to do background research on the historical improvements of your property and calculate the construction costs of these historical improvements. As such, even if your property is old, most of the time it is still worthwhile to get a Tax Depreciation Report done.


What if my property has been renovated?

If substantial renovations have been done on your property, then you are able to claim deductions based on the cost of renovation works and other additional items. This is in addition to the deductions you can claim normally from the original construction of the property. It is always a good idea to include any renovation details when preparing a Tax Depreciation Report. 


How about the assets I scrapped before the renovation?

This is another reason why you should call a Quantity Surveyor before you do any improvements to your property, because we as Quantity Surveyors can estimate how much life your assets have left in them and how much you can claim based on the assets' effective life.

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Once I have my Tax Depreciation Report, what do I need to do next?

Once you have your Tax Depreciation Report, you can hand it over to your accountant, or you can use our easy to read report when you are doing a self-assessment of your yearly tax return.

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So what are you waiting for? Don't waste your cash return by waiting too long, click the button below to get started now.

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