Claiming Depreciation


Maximise your cash returns despite the age of your property. Whether your property is old or new, significant deductions can usually be claimed.

Property depreciation is the wear and tear of buildings and assets within a property over time.

The Australian Taxation Office (ATO) allows investment property owners to claim depreciation as a tax deduction on their properties. To maximise depreciation deductions and to substantiate these deductions in your tax return a tax depreciation schedule is required.

 Quantity Surveyors are one of the only professions recognised by the ATO to estimate construction costs for depreciation purposes (TR97/25).

There are two methods investors are allowed by the ATO for claiming depreciation on the fixtures and fittings within their investment properties. These are commonly known as the diminishing value and the prime cost methods of depreciation.

Whilst there are many different investment strategies, it is important for investors to understand how these two different methods of claiming depreciation will affect their cash flow. The diminishing value and prime cost methods both calculate the total value of the depreciation claim available over the life of a property. Each method uses a different formula to calculate depreciation deductions and therefore achieve different short and long term cash flow outcomes.

Benefits of using the Diminishing Value Method:

Legislation allows property investors who use the diminishing value method to increase the rate an asset depreciates at, therefore increasing deductions sooner. This method calculates the depreciation based upon the reduced written down value remaining so the deduction diminishes over time. 

Benefits of using the Prime Cost Method:

The prime cost method uses a lower percentage rate of depreciation and results in a consistent deduction per year, spreading the deductions out more evenly over time.

Claiming depreciation for SMSF properties

There are tax implications when the trustees of a SMSF choose to invest in real estate. As with any other property investment, SMSF trustees who invest in real estate are entitled to a capital works deduction for the wear and tear on a building’s structure and also for the depreciation of all plant and equipment items contained inside and outside the property. (BMT Quantity Surveyors

Companies such as BMT require just a simple phone call with your property details to organise a site inspection . Your customised depreciation schedule can be delivered to you and your nominated Accountant in as little as five to seven days of your property inspection. 

The information supplied is a general guide only, investors should always seek professional advice.

 You can check out the BMT Tax Depreciation Calculator by following the link below.