What is a Tax Depreciation Schedule?
Depreciation itself means that the values of particular assets decrease over time because of constant usage (wear and tear). Tax depreciation schedules are documents that list all of these assets and their respective decline in value. Property investors can then use this data to claim their income tax returns each year. Essentially, an income tax depreciation schedule helps you reduce your taxable income and claim tax deductions on your investment property.
An Australian tax depreciation schedule is usually calculated by determining the original construction cost of the building and the cost of property plant and equipment assets.
A residential tax depreciation schedule, for example, might show that the original construction cost for a house was $250,000. The schedule will then separate this into two categories:
- Division 43: Capital Works/Building Allowance
- Division 40: Plant and Equipment
Let’s say the Capital Works Allowance component makes up $220,000 of the $250,000 total cost. This includes structural elements, such as roofing, shower screens or windows. Investors are eligible to claim this cost at 2.5% per annum.
The plant and equipment component will form the other $30,000 portion of the total cost and include the cooktop, exhaust fans, window curtains, etc. These assets typically depreciate at a faster rate based on their effective lives.
When preparing your tax depreciation schedule, Washington Brown works in complete compliance with ATO guidelines and according to the latest changes regarding the effective life of depreciating assets. Every tax return depreciation schedule we produce is valid for up to 40 years.
If you prefer to speak one-on-one with an expert regarding your tax depreciation deductions, you are free to get in touch, and we’ll explain everything to you in great detail. Whether you would prefer to speak about your property on the phone or organise your entire tax depreciation schedule online, let us know, and we will cater to your needs.
Why are tax depreciation schedules required?
A rental property tax depreciation schedule is required by law if you want to reduce the taxable income on your investment property through depreciation. You are not allowed to estimate the construction costs yourself. Furthermore, you would wish to engage a qualified quantity surveying organisation to do your tax depreciation.
Washington Brown was founded in 1978, which makes it one of the oldest, most respected quantity surveying organisations in Australia.
Moreover, once you schedule a tax depreciation consultation with us, our quantity surveyors will determine if an inspection is required for your investment property and organise it as fast as possible.
That’s because we understand how valuable your time is, and the goal is to save you money in every form.
Washington Brown is registered with the Australian Institute of Quantity Surveyors & The Tax Practitioner’s board. That means that we are authorised to prepare a depreciation report for property investors. Once you get our report, you will see that we divide it into easily understandable categories, including joint ownership and split reports.
Furthermore, our property depreciation schedules are based on three crucial pillars:
- accounting experience
- construction industry knowledge
- detailed understanding of property related tax law
Frequently Asked Questions
Not understanding the importance and positive outcomes of a QS carrying out the report. Back to topThere are little things that can make a big difference to your deductions. For example we start your report from the settlement date, (other companies) do a generic full year so you are pro-rating items under $300 and Low pooled items by how long you own them. This is incorrect and the items should be claimed at 100% and 18.75% whether you own them for 1 day or 365 days of the 1st year.
Worried your proceeding with a report that might not be worthwhile? Back to topThe initial stage of the report process involves our team looking over the information received and reviewing whether or not it’s worth your while. Our mission is to provide our clients with a good return on their investment and be satisfied with the result. Our guarantee to you is if we don’t save you twice our fee in the first year, your report will be FREE.
Information on the rental property too hard to get your hands on? Back to topThat’s fine, simply provide the information that is available to you and leave the rest for the expertise of our customer service team and qualified QS to find the information for you e.g. RP data. Any uncertainties, one of our Quantity Surveyors will personally discuss with you.
Why can’t a QS estimate renovation work if the costs are known? Back to topIt is an ATO requirement that if the costs ARE KNOWN then the information must be provided. In the case where you cannot provide the information (as we know everyone’s situation is different), we ask you provide the renovations details best to your knowledge.
Washington Brown seems too expensive compared to cheaper companies Back to topIn a sense, it’s like using the cheapest builder, or the cheapest accountant. We send out qualified staff and try and get you every legitimate deduction you are entitled to. We are ATO compliant and in the short term you might be saving a few hundred dollars though in the long term you could be missing out on thousands of dollars which YOU are entitled to, simply because we are good at what we do.
My Rental Property is really old – how can there still be depreciation left to claim? Back to topA misconception is that if the rental property is older than 1987, an investor can not claim any depreciation. The tax deductions are higher on a newer rental property but are still available on all investment properties. You are still eligible to claim for plant and equipment within the property. If the property is old, the biggest claim period for these items is and the first 3 years after settlement and then the tax depreciation schedule will start to trickle through, so get in early!
How far can you backdate your tax? Back to topYes you can backdate up to 2 years from the last time you submitted your last tax return.
Can you claim on renovations that have been carried out by previous owners? Back to topYes – when inspecting the rental property, we take into account all renovations that may have been carried out to the property and then estimate for the depreciation you are eligible to claim for.
Can you claim depreciation on an overseas property? Back to topNo matter where your property is in the world, you can claim depreciation if you are an Australian tax payer. We have serviced such countries as New Zealand, USA, Indonesia, UK.
Why use a Quantity Surveyor to prepare my tax depreciation schedule and not an Accountant? Back to topAs stated in the Tax Ruling 97/25 issue by the Australian Taxation Office (ATO), your accountant is not allowed to prepare a tax depreciation schedule if the property is newer than 1987. If older, they can carry out the report, though at what expense? They will not be inspecting your rental property and you may miss out on major deductions which we can guarantee, as Quantity Surveyors we make sure you claim every cent you are eligible to.
Get a quote for a property depreciation schedule on your rental property – or use our free tax depreciation calculator to work out your potential cash flow tax saving.