What does the future of depreciation look like?
*UPDATE – Read about the Budget changes here*.
Often I’m asked by investors who are about to purchase an investment property “what should I look for in order to maximise my future depreciation claim?”
People seem surprised when I respond by saying whilst depreciation is an important part of the property investment equation, I recommend that it should not be part of your initial decision-making process.
Prospective investors should first be asking questions like:
Once you’re satisfied on these fronts, THEN consider how to make depreciation work for you.
Here are four things to consider to increase the return on your investment property for the future:
- Carpet and floating floors will depreciate at a greater rate than, say, a tiled floor which is only depreciable at 2.5% per annum.
- Blinds and light fittings are highly depreciable and can often be written off immediately.
- Split-system air conditioning systems provide higher depreciation compared to ducted ones. As the ducting itself is part of the building and only claimable at 2.5% per annum.
- If built after 1987, can claim the building allowance component significantly increasing your claim.