Understanding calculated results
Understanding Your Tax Depreciation Estimate
A simple guide to reading and using your results
What is Tax Depreciation?
Tax depreciation allows property investors to claim deductions for the natural wear and tear of their investment property and its fixtures over time. This can significantly reduce your taxable income and increase your cash flow.
Understanding Your Results
Minimum and Maximum Estimates
Your results show a **range** rather than a single figure. Here’s why:
Minimum Estimate: The conservative end of your potential deductions
Maximum Estimate: The higher end based on optimal depreciation scenarios
The actual amount you can claim will depend on:
- The specific fixtures and fittings in your property
- The exact construction date and building costs
- A detailed professional inspection by a quantity surveyor
Two Types of Depreciation
Division 43 – Capital Works Deductions
- Relates to the building’s structure itself
- Deductible at 2.5% per year for 40 years
- Applies to buildings constructed after September 15, 1987
- Examples: walls, floors, roof, foundations, fixed electrical and plumbing
Division 40 – Plant and Equipment Deductions
- Relates to removable fixtures and fittings
- Depreciated at varying rates depending on the item
- Examples: carpets, blinds, hot water systems, air conditioning, appliances
What Affects Your Depreciation Amount?
✓ Property Age: Newer properties generally have higher deductions
✓ Location: Construction costs vary by city/region
✓ Property Type: Houses, units, and townhouses have different depreciation profiles
✓ Standard of Finish: Higher quality finishes = more valuable fixtures = higher deductions
✓ Renovation: Recent renovations can significantly increase your deduction