Tips & Tricks of the Depreciation Trade

9 Ways to Cut Tax Bills Through Depreciation

Firstly, what is property depreciation?

Well, just like you claim the wear and tear of your car against your taxable income or the wear and tear of the desk in your office, you can claim the wear and tear of your property against your taxable income.

But the property must be income producing. You can’t do this on your residential house. Property depreciation laws vary from country to country. I feel we have pretty good depreciation laws in this country. In a lot of countries, you can’t claim depreciation. So we’re lucky in Australia.

In summary, any property depreciation you claim would reduce the taxable income by the amount of depreciation you claim.

Now there are two parts of a depreciation claim:

First part is what’s called the capital works allowance that relates to the building and the structure. It lasts 40 years. This is commonly referred to as the building allowance. Now the amount of the deduction is determined by the actual construction cost, NOT what it costs to buy the property.

And in order for you to claim this building allowance, the property must be bought after 1985 for residential properties.

The second part that we’re going to talk about is what’s called plant and equipment- division 40. It refers to things like ovens, dishwashers, carpets, blinds, and also common property like lifts, fire services, and ventilation systems.

Note: Deductions for plant and equipment items and the following information may only apply if you bought the property prior to May 9, 2017 – Read about the Budget changes here.

Now, the more of this stuff you have in your property, the greater the tax savings. Why? Because this stuff wears out quicker.

Now let’s get into some tips:

1. The higher the building, the higher the depreciation

Why? Because it has more of that plant and equipment stuff that I’m talking about and this stuff depreciates faster. It also has things like gyms, pools, etc.

tips and tricks

2. Old properties depreciate too

You’ve already paid something for it. So while you can’t claim the structure of the building, you may be able to claim the ovens, the dishwashers, the blinds, etc. This is because the plant and equipment is based upon what you pay for it and the effective life of each item can be a benefit. That means that if the carpets is going to last two years, you may be able to claim it over for 50% each year.

And at Washington Brown we are so confident that we actually guarantee our results. So if we can’t get you at least twice our fee in the first year, we won’t charge you!

3. Buy items that actually cost you under $300

For instance, if I was going to buy a microwave, I wouldn’t buy one that costs $330 because I would have to claim it at 20% per annum. However, I’d buy one at $295 because I would be able to claim it immediately.

4. Sometimes furnishing your property can actually result in a greater depreciation deduction

Why? Because the furniture depreciates rather quickly compared to bricks and concrete. So putting things like dining tables, bedding and all that stuff into a furnished Depreciation Quote Scheduleproperty can actually accelerate your claim to the point that if you were to buy $20,000 worth of furniture, you could possibly get a $10,000 deduction in year 1 alone! But you’ve got to be smart about this. You can’t furnish all properties as it really depends on the location. So, this tip does not apply to all properties.

5. The actual construction cost must be used

Now that’s not a tip, that’s in the law. But what we found lately is that there are a lot of properties out there that are actually being sold close to their construction cost – certainly in some areas.

For instance, a property is sold at the original selling price of $95,000 in 2004. Our client just paid $45,000 for it. The original construction was $52,000. Now, I don’t know any other way that you can get a deduction greater than what you pay for something.

tips and tricks

6. Utilise the residual value write-off

If you were to renovate a property that was built after 1985, you should get a quantity surveyor out before you do the renovation so that we can put some values onto items that you are about to remove and you can get a written down value of those items and claim it immediately as a tax deduction.

So if you remove the kitchen, the light fittings, the shelf screens, etc., all that stuff can be written off if your property was built after 1985.

For instance, you bought a property that was built in 1989 and in that property there was a kitchen that was originally installed and you now wish to upgrade it. If you were to demolish now halfway through its effective life, you could get a $10,000 immediate tax deduction for it! However, just remember that the property needs to be income producing before you rip it out.

So the tip here is to get a quantity surveyor out before you renovate a post-1985 property.

7. Always use an expert

Quantity surveyors have been recognised by the Australian Taxation Office to estimate construction costs where the costs are not known. Accountants and valuers for instance, are not allowed to estimate costs unlike quantity surveyors. However, be careful as not all quantity surveyors specialise in this service, but Washington Brown certainly does.

Also, as far as I know, a depreciation report is the only tax deduction that can be subjective and open to interpretation skill. Every other tax deduction is based on what you pay for it.

8. You get more depreciation on a new property

Now let’s have a look at the difference between the depreciation of a new property versus that of a four-year old property. It’s very similar to the effective lives of the property, that in fact, you’ll be surprised. Now, most of the deduction within a property is actually related to the building allowance. However, you’ll definitely get more depreciation on a new property compared to a pre-1985 property.

9. Use the Washington Brown Depreciation Calculator

Now, this is a good tip. You can go online and check the depreciation available on your own property using our calculator, the first calculator that uses live data! You can check new versus old properties, get an accurate depreciation assessment, and the great news is that it’s free!

Now, here are some bonus tips:

tips and tricks don't get a builder to do your report

Bonus tip # 1: Don’t use a builder’s depreciation schedule

Builders are good at building. They miss out items and they sometimes don’t understand that the design and council costs can be included. Let a quantity surveyor do the depreciation schedule for you.

Bonus tip # 2: The type of materials is a huge factor

If you renovate, you might want to consider the type of materials you are going to use. For instance, carpets depreciate over 10 years but the floor tiling will depreciate over 40 so it can add up.

As another example, various types of partitioning may yield varying depreciation allowances. Some depreciate a lot quicker than others.

Moreover, we have air-conditioners and fans as examples too where the depreciation differs…

The types of materials used may vary and in turn, may change the depreciation allowance you can claim. So it pays to consider the item you’re about to install.

Bonus tip # 3: You can claim renovation even if you haven’t done the work

If you buy property that was built in 1900 for instance, but was renovated in 1990 not even by you, you can still claim depreciation. You can claim the renovation cost even if you didn’t do the renovation.

Bonus tip # 4:

Our iPhone app is downloadable from the iTunes store for free, enabling you to get numbers at the tip of your fingers! This great app also works on the iPad. Depreciation Calculator

If you want to crunch the numbers yourself, you need to input the 5 pieces of information below:

  1. Purchase price
  2. Nearest city
  3. The year the property was built
  4. Property type
  5. State of the finish within the property

Then, click calculate and Bingo! You can compare the depreciation deductions between the diminishing value method and the prime cost method!

And if you’re happy with the results, simply get a quote from us and give us a call so we can discuss the property over the phone. It’s all in the power of your hands!

Here are five things for you to take away today:

  1. Old properties depreciate too
  2. You don’t have to buy new to claim renovation
  3. Renovation helps your cash flow
  4. If you’re about to renovate a property that was built after 1985, get us out before you do so
  5. And remember: Always use an expert!

Thank you and if you have any questions, please contact us at 1300 990 612 or send an email to

If you need a depreciation schedule for your investment property – get a quote here or work out how much you can save using our free calculator.

Tips & Tricks of Property Investing

Tips & Tricks of Property Investing

Let’s get into the tips & tricks of property investing:

1. The higher the building, the higher the depreciation

Why? Because it has more of that plant and equipment stuff that I’m talking about and this stuff depreciates faster. It also has things like gyms, pools, etc.

(UPDATE: Deductions for plant and equipment items may only apply to commercial properties, brand new properties, if you bought the property prior to May 9, 2017, or some other exceptions – Read about the Budget changes here).

2. Old properties depreciate too

You’ve already paid something for it. So while you can’t claim the structure of the building, you may be able to claim the ovens, the dishwashers, the blinds, etc. because the plant and equipment is based upon what you pay for it and the effective life of each item can be a benefit. That means that if the carpets is going to last two years, you may be able to claim it over for 50% each year.

And at Washington Brown we are so confident that we actually guarantee our results. So if we can’t get you at least twice our fee in the first year, we won’t charge you!

3. Buy items that actually cost you under $300

For instance, if was going to buy a microwave, I wouldn’t buy one that costs $330 because I would have to claim it at 20% per annum. However, I’d buy one at $295 because I would be able to claim it immediately.

4. Sometimes furnishing your property can actually result in a greater depreciation deduction

Why? Because the furniture depreciates rather quickly compared to bricks and concrete. So putting things like dining tables, bedding and all that stuff into a furnished property can actually accelerate your claim to the point that if you were to buy $20,000 worth of furniture, you could possibly get a $10,000 deduction year 1 alone! But you’ve got to be smart about this. You can’t furnish all properties as it really depends on the location. This tip does not apply to all properties.

5. The actual construction cost must be used

Now that’s not a tip, that’s in the law. But what we found lately is that there are a lot of properties out there that are actually being sold close to their construction cost – certainly in some areas.

For instance, a property is sold at the original selling price of $95,000 in 2004. Our client just paid $45,000 for it. The original construction was $52,000. Now, I don’t know any other way that you can get a deduction greater than what you pay for something. Depreciation Quote Schedule

6. Utilise the residual value write-off

If you were to renovate a property that was built after 1985, you should get a quantity surveyor out before you do the renovation so that we can put some values onto items that you are about to remove and you can get a written down value of those items and claim it immediately as a tax deduction.

So if you remove the kitchen, the light fittings, the shelf screens, etc., all that stuff can be written off if your property was built after 1985.

For instance, you bought a property that was built in 1989 and in that property there was a kitchen that was originally installed and you now wish to upgrade it. If you were to demolish now halfway through its effective life, you could get a $10,000 immediate tax deduction for it! However, just remember that the property needs to be income producing before you rip it out.

So the tip here is to get a quantity surveyor out before you renovate a post-1985 property.

7. Always use an expert

Quantity surveyors have been recognised by the Australian Taxation Office to estimate construction costs where the costs are not known. Accountants and valuers for instance, are not allowed to estimate costs unlike quantity surveyors and not all quantity surveyors specialise in this service, Washington Brown certainly does.

Also, as far as I know, a depreciation report is the only tax deduction that can be subjective and open to interpretation skill. Every other tax deduction is based on what you pay for it.

8. You get more depreciation on a new property

Now let’s have a look at the difference between the depreciation of a new property versus that of a four-year old property. It’s very similar to the effective lives of the property, that in fact, you’ll be surprised. Now, most of the deduction within a property is actually related to the building allowance. However, you’ll definitely get more depreciation on a new property compared to a pre 1985 property.

9. Use the Washington Brown Depreciation Calculator

Now, this is a good tip. You can go online and check the depreciation available on your own property using our calculator, the first calculator that uses live data! You can check new versus old properties, get an accurate depreciation assessment, and the great news is that it’s free!

Now, here are some bonus tips:

Bonus tip #1: Don’t use a builder’s depreciation schedule

Builders are good at building. They miss out items and they sometimes don’t understand the design and council costs can be included. Let a quantity surveyor do the depreciation schedule for you.

Bonus tip #2: The type of materials is a huge factor

If you renovate, you might want to consider the type of materials you are going to use. For instance, carpets depreciate over 10 years but the floor tiling will depreciate over 40 so it can add up. Depreciation Calculator

As another example, various types of partitioning may yield varying depreciation allowances. Some depreciate a lot quicker than others.

Moreover, we have air-conditioners and fans as examples too where the depreciation differs…

The types of materials used may vary and in turn, may change the depreciation allowance you can claim. So it pays to consider the item you’re about to install.

Bonus tip #3: You can claim renovation even if you haven’t done the work

If you buy property that was built in 1900 for instance, but was renovated in 1990 not even by you, you can still claim depreciation. You can claim the renovation cost even if you didn’t do the renovation

Bonus tip #4: Get Mobile

Our iPhone app is downloadable from the iTunes store for free, enabling you to get numbers at the tip of your fingers! This great app also works on the iPad.

If you want to crunch the numbers yourself, you need to input the 5 information below:

  1. Purchase price
  2. Nearest city
  3. The year it was built
  4. Property type
  5. State of the finish within the property

Then, click calculate and Bingo! You can compare the depreciation deductions between the diminishing value method and the prime cost method!
And if you’re happy with the results, simply get a quote from us and give us a call and we can discuss the property over the phone. It’s all in the power of your hands!

Here are five things for you to take away today:

  1. Old properties depreciate too
  2. You don’t have to buy new to claim renovation
  3. Renovation helps your cash flow
  4. If you’re about to renovate a property that was built after 1985, get us out before you do so
  5. And remember: Always use an expert!

Thank you and if you have any questions, please contact us at 1300 990 612 or send an email to

If you need a depreciation schedule for your investment property – get a quote here or work out how much you can save using our free calculator.

Are You a Complete and Utter Property Flip?

Flipping property tax consequences

Are you a property flip?

When flipping property – what are the tax consequences?

From my experience there are two types of property owners who “flip” stock in the housing market. Depreciation Calculator

Firstly there are the ones who buy off the plan and try to on-sell (flip) the property to someone else prior to the settlement date.

The second type are renovation “flippers” – they try and buy an old house or unit and immediately renovate the property to flip to the next buyer to make a profit without the intention of ever holding it.

If the “flipper” is successful – the good news is they may make a capital gain. The bad news is – they won’t be able to claim any depreciation along the way.

The simple reason for this is that neither flipper has ever had the property available for rent. The flipper who bought the property off the plan – doesn’t even ever technically own it – due to the fact you own a property when you settle on a property.

In both cases if the flipping doesn’t work and they end up owning the property then getting a depreciation may become a viable option if the property becomes available for rent.

Once the property becomes available for rent – the owner of the property can immediately start claiming depreciation.

If you do hold a property that has been renovated – you can claim the costs of those renovations as a tax depreciation deduction. Depreciation Quote Schedule

If you need a depreciation schedule quote – click on the link.

A Quantity Surveyor will split the costs of those renovation into two categories:

  1. The Plant & Equipment – things like ovens, dishwashers, blinds etc. These items tend to wear and tear quicker and according to the ATO can be claimed at a faster rate in comparison to;
  2. The Capital Works Allowance – the bricks, concrete & roof etc. These items tend to last longer and have to be claimed over a 40 year period.

(UPDATE: Deductions for plant and equipment items may only apply to commercial properties, brand new properties, if you bought the property prior to May 9, 2017, or some other exceptions – Read about the Budget changes here).

It’s worth noting here – that if you have renovated a property that was built after 1987 (not that uncommon) – then you may be able to depreciate not only the new work BUT the existing structure as well!

If you need a depreciation schedule – get a depreciation quote here – or use our FREE depreciation calculator

That’s Flipping property tax consequences – all explained.