SINCE 1997

Immediate deductions available for investors

Woman's hands calculating tax deductions
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Immediate deductions can help investors get the most out of their tax returns. Photo: Shutterstock

Immediate deductions available for investors

Depreciation isn’t the only tax deduction available for property investors - immediate deductions can also save thousands on a tax return.

Depreciation is the natural wear and tear of property and assets over time. It’s normally thought of as a high-value, slow-burn deduction as it takes up to forty years for an entire property to depreciate. 

But there is an immediate deduction available for depreciable assets. Savvy investors just like you can start claiming it now and increase cash by thousands in a year. 

What is the immediate deduction?

Plant and equipment assets are those that are easily removable or mechanical in nature. For investment properties, they often come in the forms of furniture, kitchen appliances, hot water systems, blinds and light fittings. 

When a plant and equipment asset costs $300 or less it may be eligible for the immediate deduction. This means you can instantly claim the cost in the year of purchase. There’s no limit to the amount of immediate deductions you can claim in a year, so total deductions can easily reach the thousands. 

Rules

Not all plant and equipment assets are eligible for the immediate deduction. When preparing your tax depreciation schedule, a specialist quantity surveyor will analyse the asset against the relevant rules. 

They will consider the cost, use of the asset, whether it’s substantially identical to other assets and if it’s part of a set. 

What happens if the asset costs up to $300 but doesn’t meet the rules? 

When an asset doesn’t meet the relevant rules, you can still take advantage of accelerated depreciation deductions through low-value pooling. 

Low-value pooling allows you to claim 18.75 per cent of the asset’s value as a depreciation deduction in the first year, and 37.5 per cent for each following year. This incentive is available to plant and equipment assets that are valued, or cost less than, $1,000. 

You can take advantage of every available depreciation deduction and incentive by obtaining a tax depreciation schedule. Only a specialist quantity surveyor can prepare the most accurate and compliant tax depreciation schedule that lasts the lifetime of the property.

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