If you are planning to purchase an investment property, you may wonder how you can take advantage of depreciation.
Some people think there’s no point in getting a depreciation report if the property is not reasonably new. However, we have had new clients who had never previously claimed depreciation for their rental, obtain a depreciation/QS Report, and then been able to claim thousands extra in tax deductions each year, well worth the investment in the report (which is tax-deductible in itself).
So, how much can you claim as deduction? Here is a specific example from Washington Brown’s Depreciation Case Study involving a Second-Hand House (Built After 1987).
Client Name and Address Details have been altered for privacy.
Marie came to Washington Brown looking to maximise her tax depreciation deductions, having purchased a second-hand investment property in 2018.
The house was originally built in 2000 and was purchased for $1,200,000 in 2018.
The two-storey house consisted of 4 bedrooms, 2 bathrooms, and a double garage, with a total internal area of 304sqm.
As Marie purchased the house after 9 May 2017 and the property was not brand new, she was not able to claim deductions for the “previously used” fixtures/fittings (Plant & Equipment / Div 40).
Despite this, as the property was built after 1987, she was still eligible to claim yearly deductions against the original structure. In addition, she was also able to claim deductions against the structural component of any previous owners’ renovations/improvements.
Marie’s report from Washington Brown allowed her to claim the yearly deductions displayed below. The first year’s figures are specific to Marie’s settlement date in mid-August (slightly less than full financial years’ ownership).
By providing the Washington Brown depreciation schedule files to her accountant, Marie was able to claim over $8000 in her 2019/2020 tax return. In addition, she was also able to amend her 2018/2019 tax return to claim an extra $7,396. This gave her a total initial deduction of over $15,000.
| Financial Year | Capital works deduction | Plant & Equipment | Low Value Pool Assets | Amount Claimable |
| 2018/2019 | $7,396 | $0 | $0 | $7,396 |
| 2019/2020 | $8,436 | $0 | $0 | $8,436 |
| 2020/2021 | $8,436 | $0 | $0 | $8,436 |
| 2021/2022 | $8,436 | $0 | $0 | $8,436 |
| 2022/2023 | $8,436 | $0 | $0 | $8,436 |
To view the full depreciation schedule, including an individual asset break up and Prime Cost deductions, you can download a copy here.
If you would like to find out how much you could claim on your second-hand investment property, request your FREE estimate and quote here.
