Tax depreciation and tax deductions are a great benefit to property investors. When you buy an investment property you can claim depreciation on certain parts of the building including fittings and structural components.

Tax deductions are generally grouped into two categories: Revenue costs and Capital costs.

Revenue costs

Revenue costs are the costs incurred from earning an income through your rental property. They are usually classified as being either ‘cash’ or ‘non cash’. Interest rates and expenses are the most common form of cash deductions. They are deductible at the time the cost is incurred.

Non-cash deductions include depreciation and borrowing costs. These are claimed regardless of whether you paid out any money in a particular year.

Capital costs

Capital costs relate to any finance that you used for the purchase, sale or improvement of an investment property. While buying and selling costs are not deductable against income, they can be recognised once the property is sold and capital gains tax calculations have been finalised.