A Spotlight On Depreciation

Appreciation of depreciation can prove very valuable for those with investment properties or small businesses. So what is depreciation and what and how can you depreciate?

According to the ATO definition, a depreciating asset is an asset that has a limited effective life and can be expected to lose value over time. As such, you can depreciate the cost of the asset over its life and this can then reduce your tax liability. It could even turn a tax bill into a refund cheque.I

When it comes to investment property there are two types of depreciation – the building structure or capital works allowance (Division 43) and depreciating assets such as ovens, flooring and light fittings (Division 40).

Assets depreciate much faster under Division 40 than Division 43. Generally, it’s easy to determine into which category the asset falls but there can be some confusion. For instance, you can claim an air conditioning unit under Division 40 but ducting for that unit would fall under Division 43.ii