How to Maximise Depreciation and Reduce Your Tax Bill

As the end of the financial year approaches, small decisions made before 30 June around depreciation, maintenance, and upgrades can materially improve your after-tax position. The challenge is knowing where the real opportunities are.

Depreciation: The Deduction Most Investors Undervalue

Depreciation is one of the most powerful tools available to property investors, largely because it doesn’t require ongoing cash outlay. It simply reflects the natural wear and tear of a property and its assets, yet it can significantly reduce taxable income each year.

There are two key components.:

1. The building itself; walls, roofing, tiling, and structural elements, typically claimed over 40 years.
2. The removable assets inside the property, such as appliances, carpets, and hot water systems, are depreciated over their effective life.

For many properties, particularly newer or recently renovated ones, this can translate into thousands of dollars in deductions annually. And yet, it’s often not fully utilised.

Where Investors Lose Money Without Realising

One of the most common (and costly) mistakes isn’t failing to get a depreciation schedule, it’s failing to update it.

If you’ve replaced appliances, installed new flooring, upgraded lighting, or completed even minor improvements, those items are typically depreciable. But unless your schedule is updated, those deductions are never captured.

This is particularly relevant for older properties. Many investors assume there’s little to claim, but most second-hand properties undergo some form of upgrade over time. Every new asset installed whether it’s a dishwasher, carpet, or air-conditioning unit creates a new depreciation opportunity.

Miss that update, and you’re effectively leaving money on the table each year.

EOFY Strategy: Timing Matters More Than You Think

One of the simplest ways to improve your tax outcome is also one of the most overlooked, timing your maintenance.

If repairs are completed before 30 June, they can typically be claimed in the current financial year. If they’re delayed until July, the deduction is pushed out for another 12 months.

This makes EOFY the ideal time to address outstanding issues whether it’s fixing a leak, repairing damage, or servicing key systems in the property.

It’s important to distinguish between repairs and improvements here. Repairs restore something to its original condition and are generally immediately deductible. Improvements, on the other hand, enhance or replace an asset and are usually depreciated over time.

Repair or Replace? It’s Not Just a Maintenance Decision

EOFY is also a good time to reassess ageing assets. Sometimes repairing an item gives you a quick deduction. But replacing it may provide longer-term benefits not just in reduced maintenance, but through new depreciation claims and improved tenant appeal.

For example, replacing an old appliance or upgrading a system may spread deductions over several years, but it can also reduce ongoing issues and help retain tenants.

The right decision depends on the condition of the asset, the cost involved, and your broader investment strategy. It’s rarely just a tax decision in isolation.

It’s Not Too Late to Fix Missed Opportunities

In many cases, previous tax returns can be amended to capture missed deductions. This can result in meaningful refunds and improve your overall financial position.

It’s one of those areas where a small review can uncover significant value, particularly for long-term investors who haven’t revisited their depreciation strategy in years.

If you’d like help reviewing your property before EOFY, LongView’s Property Management team can guide you through the opportunities from maintenance timing to connecting you with the right specialists – click here if you’d like us to get in touch.