What Is the $300 Immediate Write-Off Rule?
Many investors miss out on immediate deductions simply because they don’t understand how the $300 rule and low-value pooling work. The good news is, even if you’ve owned your investment property for just a day, you could still be eligible to claim hundreds, if not thousands, in depreciation. Below, we break down how immediate write-offs and low-value pooling can help you maximise your return, faster — and why understanding these rules could mean a significantly better outcome at tax time.
Depreciation deductions are pro-rated depending on when you take ownership of a property. However, like with everything, there are exceptions to the rule.
(NOTE: Deductions for these plant and equipment items may only apply if you bought the property prior to May 9, 2017 – Read about the Budget changes here)
For example:
A Sydney client of ours settled on a one-bedroom Chatswood unit on June 25th last year. Because the property was brand new, they were able to unlock substantial new property depreciation benefits. In fact, with a purchase price of $850,000, their total tax deduction for just five days amounted to more than $5,000.
“What’s the catch?” I hear you ask. Well, there isn’t one! The ability to make such a significant deduction for just a short period of time is due to the immediate write-off and low-pooling of items that are classified as plant and equipment.
The costs of ‘small items’ (valued at $300 or below) and ‘low-pooled items’ (totalling no more than $1,000) should not be pro-rated, instead they can be written off immediately. You can maximise these items whether the property has been owned for 1 day or 365 days. And the age of the property is not relevant to claiming small items or low-value pooled items. Plant and equipment in properties need to brand new property to claim depreciation.
There is a saying that goes, “a dollar today is worth more than a dollar tomorrow”, so deduct these items as quickly as possible.
Joint Ownership: How to Still Claim It All
For example:
Say an electric motor to the garage door cost the owners of an apartment block $2,000. If there are 50 units in the block, your portion is $40. You can claim that $40 outright as your portion is under $300. Provided your portion for any joint area is under $300, you can still write it off in your taxes.
Items that depreciate faster
Another tip is to buy items that depreciate faster. Items costing between $300 and $1,000 fall into the low-pool category and attract a higher depreciation rate. A $1,200 television attracts a 20% deduction while a $950 TV deducts at 37.5% per annum.
Work out how much you save using our free property depreciation calculator below or make it happen and get a free quote for a depreciation schedule now.
