A case for claiming: deductions for older properties


There have been a number of reports recently about statistics that have been released by the Australian Taxation Office (ATO) suggesting that low interest rates have lead to a reduction in the amount of claims being made for rental properties. 

However, there are a number of reasons why the deductions claimed by investors could be lower.investment property choose choice decision suburb area house property home buy sell market

Owners of investment properties continue to remain unaware of depreciation and many owners fail to ensure they maximise the deductions available to them by seeking the advice of a specialist Quantity Surveyor and obtaining a depreciation schedule.

Older property owners in particular are prone to missing out on depreciation deductions.

There are a couple of reasons for this.

The first reason could be that they simply are not aware of their depreciation entitlements and therefore don’t claim these deductions.

The second reason is that they assume their property is too old to be worth making an enquiry.house depreciation calculator market property renovation plan build construction home

This could stem from a misunderstanding of tax legislation, as the ATO provides restrictions for the owners of older properties in claiming capital works deductions.

Legislation states that the owner of any income producing property can claim depreciation due to the wear and tear of the structure of the building (capital works deductions) and the plant and equipment contained.

In older properties, capital works deductions are restricted to only those properties in which construction commenced after the 15th of September 1987.

This does not mean that older property owners are unable to claim depreciation. 

On the contrary, these owners are still entitled to substantial deductions for the plant and equipment assets contained within the property.

If any renovations have been completed, they could also still be eligible for capital works deductions as long as the renovations were completed within dates legislated by the ATO, even if these renovations were completed by a previous owner of the property.

To show the difference that depreciation can make for an investor who owns an older property, let’s look at an example scenario.

Case study

Trent purchased an older three bedroom house built in 1970 for $500,000 just over one year ago. 

Prior to making a depreciation claim, Trent’s investment property was earning a rental income of $490 per week with a total income of $25,480 per annum.

Expenses for Trent’s property, including interest, rates and property management fees, totaled $36,738.

Towards the end of the first year of owning his property, this meant Trent’s annual after tax outlay amounted to $7,093 or $136 per week.

After hearing about the benefits a depreciation claim could make to his cash flow from his Accountant, Trent contacted a specialist Quantity Surveyor to complete a thorough site inspection of his property and provide a detailed tax depreciation schedule.

The schedule outlined that Trent would be entitled to a depreciation deduction of $6,000 in the first full financial year for his property.

The table below shows Trent’s cash flow position with and without the depreciation claim.


By arranging a depreciation schedule from a specialist Quantity Surveyor, Trent was able to reduce the holding costs for his property by $2,220.

His outlay of $136 per week was reduced to $94.

To see more great case studies which show how claiming depreciation can make a difference for an investor, click here.


Subscribe & don’t miss a single episode of Michael Yardney’s podcast

Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.

Need help listening to Michael Yardney’s podcast from your phone or tablet?

We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.


Prefer to subscribe via email?

Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.


Bradley joined BMT in 1998 and as such he has substantial knowledge about property investment supported by expertise in property depreciation and the construction industry. Bradley is a regular keynote speaker and presenter covering depreciation services on television, radio, at conferences and exhibitions Australia-wide. Visit www.bmtqs.com.au/

'A case for claiming: deductions for older properties' have no comments

Be the first to comment this post!

Would you like to share your thoughts?

Your email address will not be published.


Copyright © Michael Yardney’s Property Investment Update Important Information
Content Marketing by GridConcepts