Can I depreciate assets?

Depreciating Assets

You can deduct the decline in value of depreciating assets, which are capital assets you either acquired when you purchased your property or subsequently purchased for your property. Generally speaking, these assets must be used in gaining or producing your assessable income.

 

Depreciating assets have a limited lifespan and are expected to decline in value over time. Furniture, stoves, washing machines, and TVs are all examples of depreciating assets. This deduction is particularly applicable to owners of residential rental properties.

 

Generally, you deduct the decline in value of depreciating assets over a number of years. However, in certain circumstances, the decline in value may be immediately deductible. In order for this to be the case, the asset must:

  • Cost less than $300
  • Be used mainly to produce assessable income (that is not income from carrying on a business)
  • Not be a part of a set of assets that together cost more than $300 or not one of a number of identical items that together cost more than $300

What expenses can I deduct for residential rental properties?

Depreciating Assets

You can deduct the decline in value of depreciating assets, which are capital assets you either acquired when you purchased your property or subsequently purchased for your property. Generally speaking, these assets must be used in gaining or producing your assessable income.

 

Depreciating assets have a limited lifespan and are expected to decline in value over time. Furniture, stoves, washing machines, and TVs are all examples of depreciating assets. This deduction is particularly applicable to owners of residential rental properties.

 

Generally, you deduct the decline in value of depreciating assets over a number of years. However, in certain circumstances, the decline in value may be immediately deductible. In order for this to be the case, the asset must

  • Cost less than $300
  • Be used mainly to produce assessable income (that is not income from carrying on a business)
  • Not be a part of a set of assets that together cost more than $300 or not one of a number of identical items that together cost more than $300
Deductions for Rental Properties

Deductions for rental properties are divided into two groups, those expenses that can be claimed in the same income year they occurred and those that are deductible over a number of income years.

 

The expenses that are immediately deductible are those that relate to the management and maintenance of the property, including

  • Advertising for tenants
  • Body corporate fees and charges
  • Cleaning
  • Council rates
  • Gardening and lawn mowing
  • Insurance (building, contents, and public liability)
  • Interest expenses
  • Land tax
  • Pest control
  • Property agent’s fees and commission
  • Repairs and maintenance
  • Travel is undertaken to inspect the property or collect rent, and
  • Water charges

 

If your property is negatively geared – which means that your net rental income after expenses is less than the interest on the loan you had to take out to buy the property – then you may be able to deduct the full amount of your rental expenses from other income, such as salary and wages.

 

On the other hand, expenses that are deductible over a number of income years include

  • Borrowing expenses – those incurred in purchasing your property
  • The decline in value of depreciating assets – such as carpet, furniture, and appliances
  • Capital works deductions – essentially construction expenditure

 

Note that if you only rent your property for part of the year or rent your property at non-commercial rates, you will not be able to deduct the full amount of your expenses.