Property Depreciation Rates – Timelines to Consider for Residential and Commercial Properties
Property investors ought to know that when it comes to claiming building allowance, there is a maximum amount to go for which is the full 4%. Building allowances, which are deductions that allow you to claim your investment property’s construction expenses against your taxable income, commonly range from 2.5% to 4%.
I have mentioned where you can get a 4% claim on building allowance with manufacturing buildings and short-term traveller accommodations. But where do we draw the line with residential and commercial properties?
Do you own a house, unit, or townhouse? If the construction of this residential property commenced within July 18, 1985 to September 16, 1987, you are eligible for a 4% building allowance. Residential properties with dates of construction after this time period can only claim 2.5%. However, because the you can only claim a 4% building allowance for 25 years – if you buy a property today built in 1986, for instance, there is NO building allowance left. It ran out in 2011 (ie. 1986 + 25 years = 2011)
Office buildings, serviced apartments, shops, and other non-residential properties for commercial and industrial use can also give you the full 4% on one condition. They have to be built within what we call a “window of opportunity”. This window refers to the time frame between August 21, 1984 to September 16, 1987 and it becomes an opportunity to claim 4% if your construction commencement date falls within this period. Anything outside that window can only give you 2.5% in building allowances with July 20, 1982 being the earliest date you can claim.
So these days it’s better to buy a property that falls in the 2.5% timeline – as your 4% building allowance may have been eaten up by now.