If your property has easily removable and mechanical fixtures or fittings that were not previously included in your residential property,
you may be able to claim depreciation deductions for the plant and equipment. A few examples are blinds and curtains, security systems,
light fittings, and hot water systems, just to name a few.
There is a greater complexity to the calculation of allowances applicable to plant and equipment compared to capital works, because the
quality, condition, and effective life of each asset all play a part in determining these allowances.
Depreciating plant and equipment assets based on diminishing value or prime cost is the two most common methods of depreciating assets. Both
methods use the same asset starts and end values but derive long and short-term deductions, which has a significant effect on cash flow.
Getting the correct deductions for depreciation can be quite challenging, not only because it's difficult to calculate them, but also
because it's hard to find them at all.
The following are five common depreciation deductions from investment property that are often overlooked. If the deductions are added
together, this could result in a deduction of $60,000 for total depreciation.
1. Underfloor heating: $10,000
As far as energy efficiency and safety goes, there are many benefits to installing underfloor heating in a home. On the other hand, there
are also some negative points, the main one being that it must be installed at a cost, but this is somewhat balanced by the significant tax
benefits it can offer.
Underfloor heating is a capital works asset. Based on an estimated 200 square metre house, it will be reasonable to expect total
depreciation deductions for an underfloor heating system of around $10,000. In spite of the fact that underfloor heating is an ‘unseen’
depreciable asset, it is quite often overlooked.
2. Restumping of a home: $13,000
There are a number of reasons why stumps need to be replaced, including soil movement or damaged wood, which is why re-blocking is sometimes
called restumping. For older properties, this process requires jacking up the house, removing the existing stumps, and
replacing them with new stumps, often using wood instead of concrete.
You should always review the existing stumps before making any major changes to your house; if you're planning to do major renovations, you
should make sure that the house can withstand any changes. Restumping is also a capital works deduction, which usually results in a
depreciation deduction near $13,000 or more.
3. Electrical and plumbing: $16,000
There may be times when you will need to rewire and replumb an investment property if it is old or damaged. As wiring and plumbing are
mostly hidden behind walls, they are another capital works deduction that is commonly overlooked, so you may be able to claim for
improvements completed by the previous owner. These items could generate a total depreciation deduction of about $16,000, so keep them in
4. Solar pool heating: $7,000
Solar heating can be a very effective way to keep the water pleasantly warm during colder months if you own an investment property with a
swimming pool and you wish to keep it functional all year round. Using solar heating to heat a swimming pool can be a very cost-effective
way for your tenants to save a lot of money on electricity bills, making it one of the cheapest ways to heat a pool.
It is common for solar pool heating systems to be hidden away on roofs, so when calculating depreciation, they might easily go unnoticed.
Depreciation deductions for solar pool heating systems typically range from $7,000 to around $8,000. With the diminishing value method,
these plants and equipment assets typically result in a total depreciation deduction of about $7,000.
5. Sewerage treatment assets: $12,000
There are many rural properties that have their own sewerage treatment and tank systems, but these can easily be overlooked as they are “out
of sight” and can be difficult to notice. There are several capital works that can result in a total deduction of around $12000 for
underground sewerage treatment tanks and piping, which can be depreciated over time.
In the event of a physical site inspection, property investors should not rule out the possibility of depreciation. This is a key message
that should never be overlooked by a professional quantity surveyor. There are many things that a trained eye, for example a quantity
surveyor, may not be able to see. It is a myth that your property is too old, or that you haven't owned it for long enough - you just need
to throw those ideas out of the window.