Depreciation

If you own an investment property you can claim depreciation of items such as stoves, refrigerators and furniture. That involves writing off the cost of the item over a set number of years the effective life of the asset.

Robert Kiyosaki (Rich Dad, Poor Dad) refers to depreciation as ‘the phantom cash flow’. By that he means that depreciation is a deduction sitting in your property just waiting to be claimed. It’s not something where you spend money each year and try to claw some back, like rates and management fees. And depreciation claims are often substantial.

The ATO sets out what it considers to be appropriate periods. The cost of a cooktop, for instance, is generally written off over 12 years you claim one-twelfth of its cost as an expense each year.
There are two different types of depreciation an allowance for assets such as the cooktop, and an allowance for capital works, such as the cost of construction.

It is a good idea to talk to a quantity surveyor or other depreciation specialist right from the start, so you make full and correct use of the available depreciation allowances.

The higher the depreciation bill, the higher the amount to offset against income when you are negative gearing (or to reduce your tax bill if you are positively geared).

Talk to Mortgage Australia today about your next home loan.