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Depreciation's all about claiming the wear and tear in your investment property, from
carpets and blinds, to ovens and fixtures.
It's a legal way to reduce your taxable income. And here are some tricks to help you along
the way.
WHEN YOU'RE BUYING THINGS FOR YOUR INVESTMENT PROPERTY I ALWAYS SAY YOU SHOULD ABIDE BY
ONE SIMPLE RULE.
A DOLLAR TODAY IS WORTH MORE THAN A DOLLAR TOMORROW. SO DEDUCT ITEMS AS QUICKLY AS POSSIBLE.
First up, individual items under $300 can be written off immediately.
Even if your portion of an expensive item is under $300, you can still write it off.
So let's say the electric motor of a garage door with 10 units costs $2000. That means
you're portion is $200 you can write it off immediately.
(SFX: CHA-CHING!)
More importantly, if you're buying a microwave for your property, buy one for $295 as opposed
to $305!
By doing so you can claim the whole lot in one go, rather than depreciating it at the
Prime Cost rate of 10% per annum, which is only $30 in the first year.
That's an increase of close to 1000%!!
Items valued between $300 and $1000 can also be claimed in the Low Value Method which attracts
a 37.5% rate.
So if you buy an oven at $950 you can claim $365 in the first year.
A GOOD QUANTITY SURVEYOR WILL CATEGORISE ITEMS IN A WAY THAT MAXIMISES YOUR TAX BENEFITS.
AND IF YOU'RE INVESTING WITH FAMILY OR FRIENDS, YOU HAVE THE OPTION OF SEPARATING YOUR REPORT
TO INCREASE YOUR CLAIM BUT IT'S ALWAYS BEST TO DISCUSS THIS WITH YOUR ACCOUNT.
So there you have it. Tip 1: purchasing items under $300 means you can claim them as an
immediate deduction.
Tip 2: The Low Value Method allows you to claim items between $300 and $1000 at a higher
rate.
AND TIP 3. Consider separating your depreciation report when investing with others