Property Depreciation is the Second Largest Tax Deduction for Property Investors after Capital Gains

Did you know that property depreciation is the second largest tax deduction available to property investors, right after interest expenses? While it can significantly boost cash flow and overall returns, many property investors fail to fully take advantage of this valuable deduction.

What is Property Depreciation?

Property depreciation refers to the natural wear and tear that occurs to both a property and the assets within it over time. The Australian Taxation Office (ATO) allows owners of income-generating properties to claim this depreciation as a tax deduction, offering a smart way to recoup part of the property’s value.

One major benefit of depreciation is that it doesn't require out-of-pocket spending to claim it. Unlike deductions for repairs, maintenance, or advertising—where you need to spend money upfront—depreciation works just by owning the property. It’s a tax break that comes from simply having an income-producing property.

How Can Depreciation Benefit an Investor?

Despite its clear advantages, depreciation is often overlooked by property investors, leaving them missing out on potential tax savings. By claiming depreciation, you can significantly reduce your taxable income, which means paying less tax and improving your cash flow.

On average, property investors uncover around $9,000 in deductions during the first full financial year. That's a huge boost to your return on investment!

How Can You Access This Tax Benefit?

Getting the most out of your depreciation deduction starts with creating a tax depreciation schedule. Companies like Duo Tax and BMT Tax Depreciation collect key information about your property and send a specialist to conduct an onsite inspection. They identify and record all the assets in your property that are eligible for depreciation. From there, they generate a tax depreciation schedule, which your accountant will use to claim the deductions you're entitled to.

In summary, property depreciation is a powerful, often underutilized tax benefit for investors. By claiming it, you can enhance your property’s cash flow and reduce your tax liability without spending an extra cent upfront. So, if you haven’t yet explored your depreciation options, now might be the time!