Identifying Your Property Investment Deductions

Are you thinking about “after-tax income and returns” and making the depreciation and capital allowances deductions on the plant and improvements part of your considerations?

Under the current Income Tax Assessment Act, both depreciation on plant (Division 40) and capital allowances deductions (Division 43) are claimable against assessable income.

Plant items such as carpet, vinyl, light fittings, exhaust fans, hot water units, fire hose reels, demountable partitioning, air conditioners, signage,  etc (regardless of age), can generate deductions for an investor and the building “shell” (depending on age) can provide further deductions against income.

Reasons Why Deductions Get Ignored

All too often, the deductions which can be applied against assessable income are an after-thought and typically are either:

  • forgotten all together
  • not considered worthwhile because “it’s too old” or
  • left for too long and the highest deductions from early years are forfeited

Your accountant should consider your need to reduce your taxable income and identify your deductions by referring you to someone with the experience to find the best deductions. Property deductions identification is not an exact science and it is the experience which will find the best options.

Things to Investigate When Purchasing Property

To help when considering a purchase, some items which should be investigated are:

  • the history of the building and improvements including approval dates
  • whether some original improvements might have been removed
  • the estimated rates of depreciation under the self-assessment regime
  • what fit-outs are owned by the landlord and when were they “acquired”
  • what level of detail and information is available from the vendor
  • can more information be found through other contacts

Establishing these elements early will assist in your consideration of a property, especially where you might be comparing purchase options.

Article by:
GRAHAM UPTON, Founder of PEP Consulting
27 October 2014

Contact Graham Upton on 0418 744 740