If you are thinking of investing in property – either residential or commercial – you should know about depreciation and how arranging a tax depreciation schedule can help you reduce your tax bill.
What are the top three reasons to arrange a tax depreciation report?
- Improve Cash Flow
- Reduce the Tax You Pay
- Make Investing in Property More Attainable
What is depreciation?
Put simply, depreciation is the name for an asset losing value over time. Property depreciation is a legal tax deduction related to the wear and tear of your investment property.
You can claim depreciation on:
- Residential buildings constructed from July 1985
- Non-residential buildings constructed from February 1982
- Renovation works to older buildings
The amount you can claim in depreciation will depend on the property you have purchased and when it was built.
As a general guide, the newer the property, the more you will be able to claim.
What can I claim?
Depreciation on a property is usually broken into two parts. The first part lists items that make up the structure of the building (e.g. the roof, concrete and bricks). This is known as the Capital Works Allowance.
The second part relates to items that wear and tear quicker, such as ovens, dishwashers, carpet and other fixture and fittings. These are known as Plant & Equipment, and generally depreciate faster as they have a shorter life.
Can my accountant prepare a tax depreciation schedule?
Only a qualified quantity surveyor can prepare a tax depreciation schedule to an ATO-approved standard. The quantity surveyor must also be a registered tax agent in order to satisfy the ATO’s requirements.
An accountant is not suitably qualified to estimate construction or renovation costs.
The amount of depreciation available in your investment property depends on the age of the property, its location, size, method of construction and the quantity of internal fixtures and fittings.
Can I claim depreciation on renovation works?
Yes, if the materials and equipment used are brand-new, the – yes. If you use second-hand materials, you cannot claim their depreciation.
When Should I Get a Tax Depreciation Schedule?
The ideal time is close to your settlement date, so that you can have all necessary documentation ready to submit as part of your next tax return.
What Happens When I Book a Tax Depreciation Schedule?
Booking a tax depreciation schedule with The Home Inspection Hub is simple.
First, we will contact you to gather the initial information we need about your property.
For existing properties, we will arrange a time for an inspection with you or your chosen representative. After the inspection, a schedule is then prepared.
For new builds, a schedule can be prepared from your property plans, contract of sale and list of inclusions. As no inspection is required, this is a quicker and more cost-effective option.
Our inspection and report process is carried out by a qualified quantity surveyor who specialises in tax depreciation schedules.
The report we prepare for you is easy to read and contains all of the information your accountant may require.
Get in touch and we will take you through the process and answer any questions you may have.