How does depreciation effect capital gains tax?
Claiming the FULL depreciation allowances on your investment property does not adversely affect your capital gains tax position. You are completely entitled to claim ALL deductions and CGT rulings remain the same. You will however be required to add your depreciation deductions to your capital gain when and if you decide to sell your investment. You must remember that the additional cashflow from your depreciation is likely to be far more useful up front than not having it at all. It can be utilised for additional repayments, adding value to your asset or as a buffer for vacancy. If you consider the indexing value, the dollars are actually worth far more to you now than years down the track.
