Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 311

Seven property depreciation tips for EOFY

With tax time just around the corner, many property investors are preparing to visit their accountant to complete their annual income tax assessment. Getting your tax in order can be an overwhelming task, but when you have a commercial investment property it can seem even more complex. There are many factors for commercial property investors to consider when lodging a tax return, including property depreciation.

To help you get the most out of your commercial property, here are eight top property depreciation tips for this end of financial year.

1. Both new and old commercial properties can be depreciated

Depreciation deductions can be claimed for the wear and tear of the building structure via a capital works deduction and for the plant and equipment assets within the property.

The Australian Taxation Office (ATO) allows owners of any commercial property in which construction commenced after 20 July 1982 to claim capital works deductions. If your property was built before this date, there may still be deductions available so consult with an expert.

For traveller accommodation, this date is 21 of August 1979. Depending on the year of construction, capital works deductions can be claimed at either 2.5% or 4%.

Depreciation deductions for plant and equipment assets are generally calculated based on the individual effective life for each item as set by the ATO.

2. Commercial tenants can claim depreciation too

It’s not just owners who can claim depreciation. Commercial tenants can claim depreciation for any fit-out they add to a property once their lease commences, including blinds, carpets, shelving, smoke alarms and security systems.

If lease conditions mandate a tenant return the property to its original condition, they may also be able to claim a write-off for any remaining depreciable value on the removed assets. In this instance, scrapping can be applied. Assets left behind by a previous tenant may also be available to be claimed by the property owner.

3. Know the difference between repairs and improvements

It’s important to understand the difference between a deductible repair and an improvement.

A repair is when an item or property is returned to its original state to retain its value. Repairs attract an immediate 100% deduction in the year of expense.

Improvements, on the other hand, occur when an investor enhances the condition of an item or property beyond that of when it was purchased. As improvements are capital in nature, they must be depreciated over time.

4. Don’t wait if you’ve only just purchased a property

If you haven’t owned your investment property for a full year you can still claim depreciation deductions this financial year.

Investors can claim partial-year depreciation deductions for the period their property is rented out or is genuinely available for rent. That is, when the property is given broad exposure to potential tenants and considering all the circumstances tenants are reasonably likely to rent the property.

Quantity surveyors use legislative tools such as the immediate write-off rule and low-value pooling method to make partial-year claims more beneficial to investors.

5. Make use of techniques that maximise deductions early

An immediate write-off applies to any item within an investment property with a value of less than $300. Investors are entitled to write-off the full amount of these assets in the year of purchase.

Low-value pooling, on the other hand, is a method of depreciating plant and equipment assets which have a value of less than $1,000. Such items can be added to a low-value pool and written off at an accelerated rate to maximise deductions. Item can be depreciated at 18.75% in the first year and 37.5% each year thereafter.

Immediate write-off and pooling rules may also apply if an asset is below a certain value, particularly for small and medium-sized business owners. As plant and equipment items are rarely the same age as the property and are often replaced and updated, there can be significant deductions available.

Specialist quantity surveyors can maximise your tax return by applying the immediate write-off rule and adding eligible assets to a low-value pool.

6. Amend previous tax returns

If you haven’t been claiming property depreciation deductions, the ATO allows investors to amend two previous tax returns. A tax depreciation schedule can provide the details of any deductions missed for an accountant to make a claim.

7. Get an expert to assess the property and provide a tax depreciation schedule

To ensure the correct deductions are claimed, investors should speak with a specialist quantity surveyor. Tax Ruling 97/25 states quantity surveyors are one of the few professions qualified to estimate construction costs for depreciation.

A quantity surveyor will inspect the property to make sure every plant and equipment asset is identified and that claims for fit-outs are correctly noted.

Having a tax depreciation schedule for your investment property has many lasting benefits and can help you build your wealth. A schedule will outline the available deductions for your property and help your accountant when lodging your tax return.

 

Bradley Beer is the Chief Executive Officer of BMT Tax Depreciation. The website provides additional details. This article is general information and does not consider the circumstances of any investor.


 

Leave a Comment:

RELATED ARTICLES

Australia tops Asia-Pacific for property investment

Four tips on what makes a good commercial property

Demand for non-residential property drives returns

banner

Most viewed in recent weeks

Retirement is a risky business for most people

While encouraging people to draw down on their accumulated wealth in retirement might be good public policy, several million retirees disagree because they are purposefully conserving that capital. It’s time for a different approach.

The perfect portfolio for the next decade

This examines the performance of key asset classes and sub-sectors in 2024 and over longer timeframes, and the lessons that can be drawn for constructing an investment portfolio for the next decade.

UniSuper’s boss flags a potential correction ahead

The CIO of Australia’s fourth largest super fund by assets, John Pearce, suggests the odds favour a flat year for markets, with the possibility of a correction of 10% or more. However, he’ll use any dip as a buying opportunity.

The challenges with building a dividend portfolio

Getting regular, growing income from stocks is tougher with the dividend yield on the ASX nearing 25-year lows. Here are some conventional and not-so-conventional ideas for investors wanting to build a dividend portfolio.

How much do you need to retire?

Australians are used to hearing dire warnings that they don't have enough saved for a comfortable retirement. Yet most people need to save a lot less than you might think — as long as they meet an important condition.

Welcome to Firstlinks Edition 594 with weekend update

It’s well documented that many retirees draw down the minimum amount required and die with much of their super balances untouched. This explores the reasons why and some potential solutions to address the issue.

  • 16 January 2025

Latest Updates

Investment strategies

UniSuper’s boss flags a potential correction ahead

The CIO of Australia’s fourth largest super fund by assets, John Pearce, suggests the odds favour a flat year for markets, with the possibility of a correction of 10% or more. However, he’ll use any dip as a buying opportunity.

9 ways to fix Australia's housing crisis

Decades of policy failure have induced a fall in housing affordability. Unless painful changes are made, an underclass will emerge in a society that is supposed to boast the one of the world's highest standards of living.

Shares

Australia: why the chase for even higher dividend yields?

Australia boasts one of the world's highest dividend yielding sharemarkets, providing substantial benefits to investors and retirees. Despite this, individuals often stretch for even more yield, to their detriment.

Shares

MIGA – Make Income Great Again

The Australian sharemarket seems to be rewarding a number of unprofitable companies on the promise of future riches. Yet profits and cashflows still matter, as a recent case study of Domino's Pizza shows.

Shares

Mapping future US market returns

Exceptional returns from the US sharemarket over the past decade have driven by sales growth, margin expansion, rising valuations, and dividends. Predicting future returns requires careful consideration of these factors.

Shares

Read this before you go all in on US equities

US equities rule global markets, but history is littered with examples of markets that seemed invincible — until they weren’t. Diversification will be key for investor portfolios going forwards.

Property

What impact would scrapping stamp duty have on housing?

Increasing house prices pose challenges for housing affordability. This investigates the impact of stamp duty on the property market, and how removing the tax could help address several key issues.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.