One common question I get asked when I present at seminars is simply: How does real estate depreciation work?
Well, it’s quite simple really – property investors in Australia can claim the depreciation of their investment real estate against their taxable income.
We are lucky in this country that we can do that.
In many parts of the world the real estate depreciation can only be claimed if the property is residential.
So just a tradie can claim depreciation of their ute as a taxable deduction, property investors can claim the depreciation of their real estate.
When claiming the depreciation, you need to split the property into two categories:
Firstly – the structure of the building, this is known as the building allowance and relates to things like the bricks, concrete, window and roof. Put simply the stuff that is going to last longer.
Secondly – the loose stuff, this is known as the Plant & Equipment and relates to things like the ovens, dishwashers, carpet and blinds. Put simply the stuff that won’t last as long.
As property investors we claim the depreciation of the above at different rates.
And this is where a Quantity Surveyor can help, because the Tax Office allows people like me to work this out for you.