Client Overview
Liam, a property investor, purchased a 2 bedroom, 2 bathroom apartment in Sydney in 2018 for $650,000. The apartment is part of a high rise building with shared facilities, including gym, swimming pool and elevators. Liam decided to rent out the property in 2024 and wanted to understand how a tax depreciation schedule could help him maximise his tax savings.
The Challenge
Liam was uncertain about the potential tax benefits of depreciation for an apartment, especially concerning the shared facilities. He also wanted to ensure that he could claim depreciation on his unit’s modern fixtures and fittings.
The Solution
Liam engaged with SYC Tax Depreciation, qualified quantity surveyor to prepare a tax depreciation schedule for the property. The surveyor identified two major sources of deductions:
Capital Works Deductions (Division 43)
Since the apartment was built after 1987, Liam could claim depreciation on the structural elements of his unit (eg, walls, floors and ceilings).
The surveyor also apportioned Liam’s share of the capital works related to the common areas including the gym, pool and elevators.
Plant and Equipment Deductions (Division 40)
The surveyor calculated depreciation for assets within the unit, such as carpets, blinds, air conditioning, and kitchen appliances.
Results
In the first year of renting out the apartment, Liam claimed:
$9,000 in capital works deductions, including his share of the common areas.
$6,500 in plant and equipment deductions, covering the modern brand new fixtures and appliances within his unit.
Total first-year deductions $15,500.
Over a five year period, Liam is project to save approximately $70,000 in tax, significantly improving his cash flow and offsetting the costs of property management and strata fees.
Key Benefits for Apartment Property Investors
Shared Facilities Boost Deductions: Ownership of common areas adds substantial value to depreciation claims.
Maximised Tax Savings: Modern apartment like Liam’s often feature high value plant and equipment asset eligible for significant deductions.
Cash Flow Improvement: Depreciation allowed Liam to reduce his taxable income and reinvest in his property portfolio.
ATO Compliance: A professionally prepared depreciation schedule ensured all claims were accurate and compliant with tax laws.
Conclusion
This case demonstrates how a tax depreciation schedule can unlock significant savings for apartment investors, even for properties with shared facilities. Liam’s experience highlight the important of engaging a qualified quantity surveyor to identify all eligible deductions, ensuring long-term financial benefits and more profitable investment.
