7. Organise a depreciation schedule to increase your tax deductions
As investors we want to take advantage of every cost saving device available to us, and depreciation is a good one.
A depreciation schedule works by reducing your taxable income. Fees can vary greatly so shop around for the best deal.
Depreciation is compensation for the general wear and tear of your investment property. Investing in property is a business. There are two types of depreciation: capital works, and plant and equipment.
Capital works involves the structure itself as well as items that are permanent (eg door and window fittings, the driveway or built-in cupboards).
Plant and equipment are items that can be removed (eg carpets, blinds or air conditioning units).
A common misconception is that your property has to be new to get depreciation. While your depreciation will be greatest on a new property, older properties still have some depreciation left in them, so don’t discount the possibility of depreciation offhand.
If your property was built after July 1985, you can claim both types of depreciation; however, if it was constructed earlier you can only claim on plant and equipment. Still, it’s worth the effort. After all, even the fees for the schedule preparation are tax deductible!