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Top 5 Common Misconceptions About Property Depreciation

21 May 2024

Property depreciation is a powerful tool that can significantly enhance the financial benefits of property investment. However, many investors have misconceptions about depreciation, leading them to miss out on potential tax savings.

Misconception 1: Only New Properties Can Be Depreciated

Correction: Both new and existing properties can be depreciated.

Many investors believe that only new properties are eligible for depreciation. However, this is not the case. While new properties often have higher depreciation rates due to the value of new fixtures and fittings, older properties can also provide significant depreciation benefits. Items such as carpets, appliances, and even certain structural elements can still depreciate in value over time.

Misconception 2: Depreciation Is Not Worth the Effort

Correction: Depreciation can provide significant tax benefits.

Some investors think that the process of claiming depreciation is too complicated or not beneficial enough to justify the effort. However, the tax savings from depreciation can be significant, often resulting in thousands of dollars saved each year. This can substantially improve your cash flow and overall investment returns.

Valuit can help you maximise your claim by itemising every single chattel, valuing it and calculating how it can be depreciated over time. See the difference expert guidance can make! Book the chattel valuation service

Misconception 3: Depreciation Only Applies to Chattels

Correction: While land and the building structure itself are not depreciable, depreciation applies to a wide range of assets, including both chattels and building fit-outs.

Chattels form a significant part of the depreciation schedule and cover various items such as curtains, light shades, carpets, stoves, and washing machines. However, many investors overlook the depreciation potential of building fit-outs. Items like air conditioning units, fences, and handrails can also be depreciated, significantly adding to the total depreciation claim.

Misconception 4: Depreciation Is Only for Big Investors

Correction: Property investors of all sizes can benefit from depreciation.

There is a common belief that depreciation is a strategy only beneficial to large-scale investors with extensive property portfolios. In reality, depreciation can benefit investors with properties of all sizes, from a single rental unit to a large portfolio. The key is to ensure that all eligible assets are identified and appropriately depreciated.

Misconception 5: Depreciation Claims Are Complex and Risky

Correction: With professional help, depreciation claims can be straightforward and safe.

While the rules around depreciation can be detailed, engaging a professional to prepare your depreciation schedule can simplify the process and ensure compliance with tax regulations.

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Don't let misconceptions hold you back from maximising your property investment's potential. By consulting with professionals, you can ensure your depreciation claims are accurate and compliant, ultimately maximising your savings and enhancing your investment returns

The information contained in this article is exclusively for promotional purposes. It does not in any way constitute legal advice and should not be relied upon as the basis for any legal action or contractual dealings. The information is not and does not attempt to be, a comprehensive account of the relevant law in New Zealand. If you require legal advice, you should seek independent legal counsel. does not accept any liability that may arise from the use of this information.

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