It has come to our attention that some landlords could be missing out on money in their pockets because they fail to claim depreciation.

Quantity surveyors get busier the closer tax return time looms, so now could be a good time for landlords to get their depreciation schedules done.

Many investors are under the mistaken impression that you can only claim depreciation on new properties. While new properties do attract more depreciation, older properties also qualify.
A number of quantity surveyors promise to refund investors if they don’t get their depreciation schedule fees back within the first tax year, so, really, there’s nothing to lose

The Australian Tax Office (ATO) publishes a detailed guide for rental property owners, detailing this highly complex area, right down to a check list dealing with everything from fixed and freestanding doorstops to satellite dishes, skylights and stereo systems.

The basic principle, according to the guide, is that you can deduct an amount equal to the decline in value of an asset used to produce rent. Some items are regarded as part of the setting (dwelling) for the activity and are not treated as assets in their own right, but these might be allowable as capital works deductions.

That means that, unlike other expenses you can claim on tax for such as rates, you can get cash out of depreciation without putting cash in – it’s a cash compensation for a non-cash expense. Bonus!

Incidentally, smaller units and apartments usually offer more attractive depreciation than houses because a greater proportion of their value is devoted to areas like kitchens and bathrooms which have lots of depreciable items.

One interesting tip in the ATO guide is that depreciating assets costing less than $300 can be immediately written off – or, if the property is shared between two investors, the limit is $600.

However, you can’t cheat by dividing up a large purchase, for example a set of dining room chairs, into a series of smaller purchases, the ATO warns.

It appears that investors are increasingly looking for cash-flow positive properties now that capital growth rates had declined, or reversed. Depreciation can really help people squeeze more cash-flow out of their properties.