The depreciation tax deduction is a very important one for property investors. This is because it allows you to claim back some of the money spent on the purchase and upkeep of your property.
The Australian Tax Office (ATO) allows you to claim back a certain amount of money each year as a deduction from your taxable income. The amount that can be claimed depends on the type of asset and how long you have owned it.
Here are four things you should know about property tax depreciation in Australia:
1. Tax Depreciation Works As A Tax Deductible Claim
Tax depreciation is the process of claiming a portion of your property's value as a deduction against your taxable income. This can be done by using something called diminishing value, which is essentially how much money you would have to spend to replace an asset if it were destroyed. For example, if you bought an apartment for $800,000 but spent another $200,000 renovating it (bringing the total value up to $1 million), then you can claim back some of that renovation cost as a tax deduction.
2. You Must Make A Claim For The Tax Depreciation
While property tax depreciation is a legitimate expense and something that can be written off against other sorts of income, it doesn't automatically happen without making a claim for it first. If you don't make a claim for the depreciation on your property's value when you sell it — or if you don't claim the depreciation over time by writing off expenses related to owning it — then you won't get any benefit from this kind of deduction at all.
3. In Australia Property Tax Depreciation Works On A Schedule
The Australian Tax Office (ATO) has a schedule of depreciation rates that are used to calculate how much tax you can claim on your property. These depreciation schedules change every year, usually in line with changes to the consumer price index (CPI) and other economic factors.
4. An Accountant Can Help You With A Tax Depreciation Report
An accountant can help you with a tax depreciation report that details how much the value of your property has changed over time. This information is used to calculate how much tax you are due to pay, and it's also important if you want to sell your property because it makes it easier for buyers to decide whether they want to purchase your home.
To find out more about how tax depreciation works, and how it can help you pay less tax on your property, talk to an accountant today.
