Buying new stuff between now and the end of June is often helpful come tax time, for obvious reasons. But, you may need to keep the depreciation rules in mind as not all purchases will be complete deductions for you. When talking about investment properties, a brief guide for depreciation looks something like this:

  • Assets under $300 = write off in full
  • Assets between $300 and $1,000 = low value pool
  • Assets over $1,000 = written over their effective life

Those thresholds are for each owner, bye the way, so a property held between you and your spouse could have fixtures of double those amounts before jumping to the next level.

In working out how much you can claim; things in the low value pool depreciate at 18.75% in the first year and 37.5% every year thereafter on the reducing balance. There’s no apportionment for holding the asset for only a month or so, which makes the rate quite attractive.

The effective life for more expensive assets can be anything between about four and forty years, depending on the item. Most, we find, tend to be about ten to twenty years or so (giving about 10-20% of the value each year) but these do require apportionment – so buying something over $1,000 now won’t give much benefit for the current financial year.

You’ll also need to be careful with assets vs repairs vs improvements. Genuine repairs can be written off in full when incurred, but, you’ll need to be able to show that these are simply restoring the property to its condition at the time of purchase. So, most investors are unlikely to have repairs in the first year of ownership. Improvements are costs which, well, improve the property beyond that original standard, and may need to be depreciated at a flat 2.5% per year. Yes, there’s a decimal point in there. Not ideal but sometimes hard to avoid.

So, whilst many expenses can be claimed outright and spending cash on this side of June is generally helpful, you do need to be sure how it will be categorised to ensure that you get the best tax bang for your buck.