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Tax Depreciation


Property Tax Depreciation is a piece of Australian Tax Office Legislation that was introduced in 1985 to stimulate the construction industry and provide much needed rental accommodation for Australia’s increasing population. The legislation provides large tax deductions for investors in the property rental market so that holding costs of the property asset are reduced significantly when a tax depreciation schedule is applied.

How it helps you  is that just as you claim wear and tear on equipment or vehicles purchased to generate income, you can also claim the depreciation of your investment or rental property against your taxable income.

Claiming depreciation on your investment rental property is a perfectly legal way to reduce the tax burden of your income-producing investment property in its current year, and simply defer that tax to a later date.

Property Tax Depreciation reduces an investor’s current year’s income on their property. The depreciation claimed is added back to the cost basis of the property when it is sold. Since the majority of Australian investors are looking for a long- term commitment when purchasing property, depreciation claims will maximise your property’s monthly cash

Where a new owner is unable to determine precisely the construction expenditure associated with a building, an estimate provided by an appropriately qualified person may be used. Appropriately qualified people include:

– Clerk of works, such as a project organiser for major building projects

– A supervising architect who approves payments at stages of projects

– A builder who is experienced in estimating construction costs of similar building projects

– A quantity surveyor.

Unless they are otherwise qualified, valuers, real estate agents, accountants and solicitors generally have neither the relevant qualifications nor the experience to make such an estimate

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