[Update: Please note depreciation is not allowed on buildings now]

Depreciation is the devaluation of your rental property building at a small percentage per year – this becomes a cost like rates, interest etc and makes your overall loss bigger – which equals better tax refunds. When you come to sell the property or move into it yourself, the sale price/current value is accounted for and you may have depreciation recovered in that year (only up to what you’ve claimed – the capital gain is still tax free). This will result in a bit of tax to pay back in that year.

Posted 6/10/2008

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