Tax depreciation

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Depreciation is an accounting term that refers to the ageing and wearing out of an asset over time, and it is typically one of the largest tax deductions claimable by property investors.

Even if an investment property appreciates (goes up in value), from an accounting perspective and in the view of the Australian Tax Office (ATO), the building and included fixtures and assets still wear out and diminish in value over time (they depreciate). This loss in value each year is claimable as a tax deduction.Depreciation is claimable as a tax deduction on both residential and commercial investment properties. The deduction is applied against the property’s income in the same way that other property expenses are e.g. borrowing costs, property management fees, repairs and maintenance etc. Unlike those expenses, depreciation is a calculated deduction, you don’t have to incur an expense that year in order to claim it, it is calculated for you by a quantity surveyor.

A quantity surveyor will provide you with a Capital Allowance and Tax Depreciation Schedule, that you then provide to your accountant when completing your tax return.

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