Property Depreciation Schedules - The New reality

Tip #3 – Quick guide to depreciation allowances

Washington Brown has created Australia’s first and only tax depreciation calculator that allows you to estimates the potential depreciation deductions before you buy a property.

All you do is punch in the expected purchase price of the property, and based on a collection of real life analysis, an estimated depreciation amount is calculated.

But what if you are building a house – what are the likely depreciation deductions then?

Unfortunately, there’s no calculator on the market that can make this estimation, so in this month’s QS Corner I’ve created a “ready reckoner” to help estimate the potential depreciation on the construction of an investment property.

So if you are thinking about engaging a builder to build your investment property here are the percentages you can use in relation to your construction contract value.

  1. Year 1….6%
  2. Year 2….4.5%
  3. Year 3….4%
  4. Year 4….3.75%
  5. Year 5….3.5%

That means…if my house cost $200,000 to build, I could expect a $12,000 depreciation deduction in Year 1, and a $9,000 deduction in Year 2…etc.

This guideline is best used for construction costs less than $500K. Any higher and the ratio’s are likely to decrease. So if you need further clarification, don’t hesitate to contact us.