Tax depreciation is a deduction against assessable income whereby an investor can reduce the amount of tax payable.
A depreciating asset is an asset that has a limited effective life and can reasonably be expected to decline in value over the time it is used. Such declined value is called the depreciation entitlement.
Tax depreciation is to be added to expense items such as interests, maintenance, rates and fees, etc. to reduce the investors’ assessable income and therefore, reduce the tax payable.
Tax depreciation is a non-cash deduction. Investors don’t actually need to pay it from their pocket but enjoy the actual tax benefits arising from tax depreciation every year.
Tax depreciation is a must-have tool for investors to cut down their tax and improve their cash flow effectively.