It depends on how you want to claim.
If you claim using the diminishing value method, you are claiming a greater proportion of the assets cost in the earlier years of the effective life. For example, if you purchased the property for the purposes of a short term investment and planned to sell it in five years time, the diminishing value method may be a more attractive option to take, as it provides higher returns over the earlier years. If you claim using the prime cost method, you are claiming a lower but more constant portion of the available deductions over the life of the property. This could be more suitable if you were intending to retain ownership for a longer period of time.
Our experience shows that most investors employ the diminishing value method as depreciation deductions under this method are cumulatively higher over the first five years of ownership. We always recommend that you consult with your Accountant or Financial Adviser to discuss your personal circumstances and investment strategy.
- Q1 What is capital works deduction (Division 43)?
- Q2 What is plant and equipment (Division 40)?
- Q3 How is the capital works deduction different to plant and equipment?
- Q4 Why itemise plant and equipment?
- Q5 Difference between Prime Cost and Diminishing Value methods of depreciation?
- Q6 How does low value pooling help to maximise my depreciation claim?
- Q7 What is scrapping?
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