How do I calculate depreciation on my investment property assets?
There are two methods for calculating depreciation on plant and equipment assets associated with your investment property. Both methods are approved and accepted by the ATO, which sets the ‘useful’ lifetime of assets and prescribed depreciation rates depending on the depreciation method.
- Prime Cost
This method assumes that the asset experiences even wear and tear over its useful life and accordingly a constant rate is applied. This rate is calculated by dividing 100% by an asset’s useful life in years. For example, the prime cost depreciation rate for an asset expected to last four years is 25%. It may also be referred to as straight line depreciation. - Diminishing value
This method assumes an asset wears down more in its earlier years of use and accordingly allows for higher depreciation write offs in the beginning, and less depreciation later on during the asset’s life. It is calculated by dividing 200% by an asset’s useful life in years (150% if the asset was held before 10 May 2006). For example, the diminishing value depreciation rate for an asset expected to last four years is 37.5%. It is important to check with the ATO about prescribed depreciation rates and the accepted useful lifetime of different assets.DEPPRO staff are industry-qualified and trained in-house to provide honest, reliable, accurate, ATO-compliant reports in accordance with the latest government rulings and interpretations.
An accountant or qualified professional will be able to advise on the best method for your circumstance.
How do I calculate depreciation on my building’s capital works?
As a general rule, you can claim a deduction for the cost of constructing a residential rental property over 40 years from the date the construction was completed.
To calculate your claim you need:
- the date construction commenced;
- details of the type of construction;
- the date construction was completed;
- details of who carried out the construction work;
- the construction cost (not the purchase price); and
- details of the period during the year that the property was used for income producing purposes.
The ATO sets our different rates of depreciation depending on when constructed commenced and finished, the type of construction and who undertook the construction. Full details are available from the ATO website.
To ensure you are claming your correct entitlements, order a property depreciation report from a qualified company such as DEPPRO. DEPPRO’s qualified inspectors know the latest government rulings, rates and interpretations to ensure all your maximum entitlements are claimed.
What are the ATO’s approved depreciation rates and effective lifetimes?
The ATO determines the acceptable depreciation rates and effective lifetimes for investment property plant and equipment and capital works. These rulings are regularly updated; often to coincide with the new financial year.
It is important to note that different rulings apply to residential investment properties and commercial investment properties.
The ATO publishes a list of rates and effective lifetimes on its website.
Qualified professionals, like the staff at DEPPRO, keep up-to-date with changes to the ATO rulings, legislation and interpretations.
Can I get an estimation of my property depreciation entitlements without paying for a full report?
Tax Estimate by DEPPRO provides an instant estimation of the tax depreciation entitlements claimable on a residential investment property – with no need for a physical inspection.
The specialised software work likes a calculator to provide an instant estimate of eligible tax depreciation amounts claimable on any residential investment property.
It uses DEPPRO’s extensive database of plant values and construction costs to calculate an estimation of tax depreciation entitlements to more than 92% accuracy of an ATO-compliant inspection report.
Tax Estimate by DEPPRO is a fast and efficient way to calculate the depreciate benefits of a property that you may wish to buy or sell.
If you want an accurate, ATO-compliant tax depreciation report for your tax return, order a DEPPRO property depreciation report by phoning 1300 888 489.
Visit the Tax Estimate website for an on-the-spot estimation.
