To see the FAQs most relevant to your property, please select one of the options above.
Why are there two FAQ options?
There are two different sets of Frequently Asked Questions because, due to the 2017 Federal Budget, different information is now relevant based upon when you purchased your investment property.
What are the 2017 Federal Budget changes?
In short, the changes to depreciation made in the 2017 Federal Budget, limited the scope of what property investors can claim on second-hand properties.
For properties purchased (exchanged contracts) after May 9, 2017, investors can no longer claim depreciation on ‘previously used’ plant and equipment (i.e. in second-hand properties).
Brand new, non-residential and properties that were purchased prior to May 9, 2017 (and available for income-producing purposes before 1 July, 2017) have not been affected.
To learn more on our Budget Change blog post.
I haven’t bought a property yet, which option do I choose?
If you haven’t bought a property yet, then option Properties purchased after 9 May 2017 will be most relevant for you.
I have properties that fit into both options, which do I choose?
The information in option Properties purchased after 9 May 2017 should answer most of your queries regarding each type of property – keeping in mind, for those properties purchased before May 9, 2017, you may be eligible to claim depreciation on any ‘previously used’ plant and equipment.
Alternatively, contact Washington Brown with your property addresses and our experts will take a look and determine what you are eligible to claim on.
Prefer to just speak one-on-one with an expert?
Talk to Washington Brown to have your specific depreciation questions answered.
What is a tax depreciation schedule?
A tax depreciation schedule is a document that provides your accountant with the proper information regarding depreciation claims on your investment property. Simply put, the depreciation schedule contains relevant data regarding the compensation for wear and tear of the building.
As you already know, every building goes under a wearing process, from the carpets on the floor to the kitchen instalments. This process is even more evident if you have tenants living in the building. When you take that into consideration, this becomes one of the primary reasons a depreciation schedule is required.
The depreciation schedule allows you to depreciate all of the above, a bit every tax year.
Why do you need a depreciation schedule?
The main reason for ordering a tax depreciation schedule is because it provides an excellent return on your investment property. Furthermore, if you analyse the numbers, you’ll see that a depreciation schedule offers the highest return on investment regarding all other property expenses.
Therefore, we prepared a list of the three key reasons you need a depreciation schedule during your tax return preparation.
A depreciation schedule reduces your taxable income
As we said above, the main reason we prepare a depreciation schedule is to reduce the taxable income on your investment property. Your income-earning rental property can apply for tax deductions, and one of them is the wear and tear process that happens over time. Hence, a properly prepared depreciation schedule can help you pay less tax.
A depreciation schedule is the only legal way to claim tax deductions for depreciation on the structure of your property
Another important point is that you can’t claim tax deductions for depreciation structural components of you property if you don’t have a depreciation schedule made from a qualified Quantity Surveyor. As a professional, they will do a thorough inspection of the building in order to identify what can be claimed and evaluate relevant construction costs..
A depreciation schedule could help you pay less tax even on a renovated property
According to ATO rules, a Quantity Surveyor can prepare a depreciation schedule by estimating the value of the renovation if the value is not known. Therefore, even if the previous owner completed the improvements, you are still entitled to claim depreciation.
The Washington Brown depreciation schedule
Washington Brown performs effective life calculation adjustments on plant and equipment in every eligible depreciation schedule. We even include joint ownership and split reports as a standard when it’s applicable. Inside you will find that the schedule is divided into clear categories, which is quite helpful for the final tax deduction calculations.
Furthermore, we take into consideration past renovations and post-acquisition improvements done by you or the previous owner. By identifying and evaluating all renovations and additions, you rest assured your depreciation schedule will provide the maximum allowable depreciation deductions.
Everything from the time you may have lived in the property to the furniture packages is taken into account during the final evaluation. In fact, our calculations start from a specific settlement date rather than the 1st financial year.