As a property investor, you will already know that you can deduct business expenses from your rental income, but are you sure you’re not missing out on anything that’s available to you?

Claiming depreciation

Some examples of expenses you can deduct from your rental income are; insurance premiums, agent and professional fees, repairs and maintenance and depreciation on capital expenses (something you might miss if you’re preparing your own return).

Remember though, you can only claim depreciation on assets kept in your business for more than one year, and not all assets are depreciable. These are called capital expenses or capital assets, which don’t include land, trading stock, franchise fees, and intangible assets such as goodwill – as clearly, they don’t depreciate in value at all.

Currently, you can’t claim depreciation for business assets costing less than $1,000 – these can be expensed fully in the year the cost was incurred. On the other hand – if you have low value assets, you can group them together to depreciate as a pool but once done, they cannot be taken out of the pool. Pooled assets depreciate using the diminishing value method and must use the lowest depreciation rate among all included assets – note that buildings can’t be part of a pool. Pooling assets can be slightly complicated sometimes, so best to get in touch with an accountant with a fine touch!

GST

If you’re registered for GST, you claim depreciation on the asset price minus the GST. If not, you claim it on the total price of the asset, including GST. Depreciation rates vary for different assets based on the useful life and cost of the asset – so be careful you’re choosing the correct rate and method when depreciating an asset.

Good news is from 2021, depreciation deductions are allowed for non-residential buildings again. This means you can claim depreciation through the diminishing value method that depreciates at a higher rate with a reducing base each year, or the straight line method with the same depreciation rate each year.

Property accounting

Are you still with me or did I lose you at “diminishing?”. Good news is, you can just leave this with your accountant, and get back to doing what you love.  Give us a buzz and let’s see how we can work out your depreciation but, in any case, the total depreciation you can claim is the same for both methods. You can even change methods along the way! Just call us!

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