Boost your bottom line: how claiming depreciation with BMT benefits investors

Property depreciation is a valuable tax deduction which allows investors to make an annual claim for the gradual wear and tear of an income-producing property and its assets. By doing so, investors can significantly reduce their taxable income, resulting in substantial savings. Maximising these deductions enables investors to optimise cash flow and enhance overall profitability.

Often overlooked by investors, property depreciation is the second largest tax deduction after investment loan interest. It is a non-cash deduction, meaning investors don't have to spend money to claim it. To help investors claim maximised tax deductions, BMT Tax Depreciation prepare comprehensive tax depreciation schedules which outline all available deductions over the effective life of the property. 

Case study: a brand-new unit generates thousands in deductions
 

New unit purchased for $650,000	Without depreciation	With depreciation
Pre-tax cash flow
Annual income	$31,200	$31,200
Annual expenses	$42,400	$42,400
Total loss (before depreciation)	$11,200	$11,200
Depreciation claim		$14,800
Total loss (tax deduction)		$26,000
Post-tax cash flow
Tax refund (loss x 37% tax rate)	$4,144	$9,620
Net cost to own property	$7,056 year $136 week	$1,580 year $30 week

Prior to claiming depreciation, the owner incurred a cost of $136 per week to own the property. However, by claiming depreciation, this cost was significantly reduced to $30 per week, resulting in an improvement of $106 per week. This case study highlights the financial benefits associated with claiming depreciation and engaging the services of BMT Tax Depreciation to enhance cash flow.

Although depreciation can no longer be claimed on second hand assets in residential properties, there are still significant deductions to be claimed as:
 

• Capital works deductions for new and second-hand properties, which make up 85 to 90 percent of claims are unaffected regardless of when the property was purchased.
• Those who purchase brand new residential and substantially renovated properties, commercial real estate or add new plant and equipment assets to a second-hand residential property can still claim substantial depreciation deductions.

The proposed 2026-27 budget changes, which will quarantine rental losses from residential buildings, does not apply to new residential buildings or to residential buildings acquired before 12 May 2026. For these buildings, there are still valuable deductions to be claimed for capital works and depreciation. For those properties affected by these proposed changes, claiming these deductions will be a significant tax saving where properties are positively geared, or likely to be positively geared in the future, or where an investor has other rental properties that are positively geared to offset the losses against.  

Investors looking to maximise depreciation deductions should call BMT on 1300 728 726 or Request a Quote. 

Bradley Beer (B. Con. Mgt, AAIQS, MRICS, AVAA) is the Chief Executive Officer of BMT Tax Depreciation. Please contact 1300 728 726 or visit bmtqs.com.au for Australia-wide service.