You can claim a tax deduction for depreciation of many things in your investment propety - including garden gnomes. Picture: Supplied Source: Supplied

The financial year ends one month from now and investors should start thinking about how they can collect a handy refund.

Most tax deductions require you to spend money to grab it, so you’re still losing out. But one type of deduction — depreciation — gives you cash back for money you don’t physically spend.

Whether it’s writing down the construction cost of a building, or specific deductions for the declining value of curtains or kitchen appliances, depreciation is known as a non-cash deduction and no cash outlay is needed.

Too many investors don’t make the most of Australia’s depreciation rules.

Sadly, I was once one of them.

I thought I knew what I was doing with a couple of investment properties years ago, and dutifully filed my tax return with a few depreciation claims for obvious things such as carpets.

Then I discovered the delightful world of depreciation schedules, which have a boring name but deliver investors a pile of cash that is definitely not boring.

They are provided by quantity surveyors who typically charge $500-$700 to come to your property and put together a report listing all the things you can depreciate, right down to garden gnomes.

Their fee is tax deductible and many quantity surveyors guarantee that you’ll get more money back from the taxman than they charge. If you don’t, they won’t charge you.

It sounds like a no-brainer, but it’s believed that up to 80 per cent of investors are not taking full advantage of the rules and leaving their dollars with the Australian Taxation Office each year.

BMT Tax Depreciation CEO Brad Beer says latest ATO data shows the average depreciation claim is about $3200.

“Information collected from thousands of BMT Tax Depreciation schedules suggests the average claim should be around $10,100 in the first full financial year of ownership, and $7350 per year on average over the first 10 years of owning a property,” Beer says. I’ll drink to that!

You don’t have to pay for a new one every year — many depreciation schedules will provide your claimable tax deductions for the next decade.

Google “depreciation schedule” and you will find the websites of several quantity surveyor firms, plus an article explaining them in more detail on realestate.com.au

Many sites have calculators that give you a rough idea of the sort of refund you are looking at.

Depreciation schedules deliver the biggest bucks for newer investment properties, but even older ones often have renovations and residual deductions from building work that make it a worthwhile exercise.

Any exercise that gives you free money is worth doing. You’d jump on a treadmill for 10 minutes if someone promised you $1000 at the end of it, so don’t ignore the delightful world of depreciation.

Anthony Keane is personal finance writer for moneysaverhq.