Property rental rates and values can change, and this is particularly evident for units and other types of strata complexes.
One thing that remains constant is the tax deductions rental properties provide to their investor owners. An added benefit is the lucrative common property depreciation deductions strata investors can claim.
What is common property?
When you own a property that’s part of a strata title, such as a townhouse or unit development, paying strata fees is part of the parcel.
These fees cover a range of things depending on the building. This can include insurances, maintenance, council rates and shared facilities maintained and funded by the body corporate. As an investor, you can claim the strata fees as a tax deduction.
Another factor to consider is the depreciation you can claim. Not only can you claim depreciation for the actual property you own, but you are also eligible to claim a partial deduction on the common property assets. These are your common property deductions. Some key examples include:
- gym equipment
- fire safety equipment
- security cameras
- common area flooring (e.g. hallway carpet)
- garage doors.
How does common property depreciation work?
Common depreciation deductions are available on a pro-rata basis. They are established from the ownership percentage you have of the strata.
For example, if your ownership percentage is deemed as 10 per cent and the elevator holds a depreciable value of $12,000 the value your depreciation deductions would be based off is $1,200 (10 per cent of $12,000).
How to claim common property deductions
The most accurate way to claim common property depreciation is with a tax depreciation schedule prepared by a specialist quantity surveyor.
A Tax Depreciation schedule includes pro-rata calculations that your accountant will use to determine your common property deductions each financial year.