Tax Depreciation on Residential Properties Explained

The following comments are relevant to most rental properties. There are many subtle variations, but as a guide this will normally apply.


Capital Allowance


Houses or units starting construction after 15 September 1987, will attract depreciation on the building (referred to as Capital Allowance).


The construction cost is depreciable at 2.5% per annum for a total of 40 years from date of completion. This is your major source of the claim on your property.


This percentage applies to the original construction cost of the house and not the current cost or the current purchase price and is claimable for a period commencing upon completion of construction.


Depreciation is also applicable to any capital improvements made to the property by anyone. So even if the property is too old (Pre 1987) for the capital allowance to apply, the costs of renovations or additions since 15 September 1987 are eligible. Older properties should not be ruled out as a result.


Plant Allowance


Depending on your circumstances, relevant fixtures and fittings within the house or unit (referred to as plant) are depreciable. These include stoves, hot water systems, pumps, fans, airconditioners, carpet, curtains, garage door motors, swimming pool plant etc.


Budget changes in May 2017 can often rule these items out if they are not brand new.



Quantity Surveyors


The ATO has determined that there are very few people eligible to prepare the correct depreciation schedules for rental houses or units. Quantity Surveyors are one of those eligible people and as a result, many accountants or tax agents refer their clients to a Quantity Surveyor.


The Australian Taxation Office’s “Rental Properties 2019” document states “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”


Please do not hesitate to contact Neil Richardson – Quantity Surveyor, for any queries that you may have in relation to your rental property. Neil prepares reports for properties throughout Central Queensland and for most properties charges a fixed fee. Neil is a qualified Quantity Surveyor and will inspect your property and prepare the report. Not all firms will guarantee sending a qualified Quantity Surveyor to inspect your property.



Ph 0418 184 701

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