The Australian Financial Review on Friday, 17 January 2003 had an interesting article regarding depreciation allowances for investment units.

The paper states "Property Investors have been given a harsh warning after a Queensland investment unit owner lost a dispute with the Australian Tax Office over common depreciation claims. ....... After asking him (the unit owner) to complete a rental property questionnaire, the ATO reduced Mr Woodward's depreciation claim by $3,036 (from $9,361)....  The ATO said they (certain items in the claim) were integral to the building and not depreciable.  Deputy president of the tribunal ... agreed with the ATO, saying the items claimed were clearly absorbed by the structure of the building and "part of the fabric of the rental apartment.  The applicant would not be able to have an income-producing property without those items and therefore the tribunal considers they are not plant.

The decision has implications for other investors as such items are commonly claimed by residential apartment owners, according to building surveyor Napier Blakeley.

The ATO says common mistakes made by rental property owners include claiming full expenses on holiday homes and properties rented to friends and relatives."

HTW Cairns and Brisbane believe that with the focus that has been put on depreciation allowances which apply to residential investment property, and to a lesser extent commercial investment property, by developers in particular, this could have a significant impact on a residential investment market that is already showing signs of decline.