Tax Depreciation
(Simple example) The Tax ACT states that if you purchase an asset for the sole purpose of earning a living then you are allowed, under current legislation, to depreciate that asset as a deduction against any income generated.
In residential property there are two types of tax depreciation allowance.
- The building
- The plant
Each are handled differently. The building allowance was introduced in 1985, and therefore any building prior to that does not qualify for the allowance. Although renovations and extensions built after that year are eligible for tax deductions.
The plant is assessed at every purchase and valued accordingly at that date. A simple 1st year example of the benefits of claiming tax depreciation deductions are provided.
Simple example of claiming Tax Depreciation |
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| Mr Average | Mr Smart | |
| Gross Salary | $65,000 | $65,000 |
| Rental Income | $21,600 | $21,600 |
| Interest Payments | $16,000 | $16,000 |
| Tax Depreciation | Not claimed | $14,800 |
| Taxable Income | $70,600 | $55,800 |
| Tax Payable | $16,239 | $11,577 |
Tax Depreciation Articles
Property Returns Founder James Hannah’s library of past articles that cover a wide range of property allowance topics.
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Don’t just be another gnome– claim your legitimate tax deductions API Magazine August/September 2002 If you have inclinations about the legitimacy and accuracy of this investment tool then this article should put them to rest, as James takes the cover off one of most effective and beneficial property investment tools... click here for more.
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| Older properties in focus – API Magazine June/July 2002 Everything you need to know about depreciation on properties that have been build pre 1985... click here for more. |
| A Can of Worms – API Magazine OCT/NOV 2002Touches on issues and common misconceptions with post purchase expenditures and the differences between actual cost and value... click here for more. |
| ATO Deals Another Low Blow - FEB/MARCH 2003The article explains the ATO legislation changes which took effect from the 1st July 2001 which applied to items that were once claimed as plant assets and are now deemed to be of a capital 2.5% a year nature... click here for more. |
| A Closer Look – API Magazine APR/MAY 2003 The article expands on the ATO legislation changes which took effect from the 1st July 2001 through analyses of the impact these changes had on the returns of the property and to the investor. The examples are very informative and give great insight into the first principals of property tax depreciation... click here for more. |
| Repairs and Maintenance – API Magazine Aug/Sep 2003 This article is a must read for all investors who are purchasing older properties in need of restoration, as all the relevant questions on claiming a immediate deductions for works are answers in simple yet effective case study examples... click here for more. |
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