Depreciation Schedules Explained
Depreciation is one of the best tax breaks available to property investors, but you’ll need a depreciation schedule in order to claim it.
To show you how a depreciation schedule can save you money, I’ll be covering what a property depreciation schedule is and how to go about creating one.
What can I claim through depreciation?
Generally speaking, there are two types of depreciation allowances available to investors:
- Depreciation on building allowance.
- Depreciation on plant and equipment.
Building allowance is the deduction available on the building structure (for example, concrete and brickworks) and is commonly known as the building write off.
Plant and equipment, on the other hand, is the allowance for removable items within the building itself: things like ovens, dishwashers, and carpet – even your garbage bins.
While only properties built after July 1985 qualify for both types of deductions, you can still claim plant and equipment depreciation on properties built before this date. Even for older properties, the savings can be significant.
Even for older properties, the savings can be significant.
What does a depreciation schedule include?
A depreciation schedule is a detailed document that includes:
- A breakdown of all building allowance costs.
- A breakdown of all plant and equipment costs.
- The rates at which you can claim different items and the effective lifespan estimate of each item.
- A breakdown of how much you can claim per annum based on the financial year end.
A good report will break down your plant and equipment depreciation by two methods: the diminishing value method and the prime cost method, which give you different options for claiming depreciation on your assets depending on your needs.
A good report breaks down your plant and equipment depreciation by two methods: the diminishing value method and the prime cost method.
How do I get a depreciation schedule?
In order to create a depreciation schedule, you’ll need to schedule a site inspection with a qualified quantity surveyor if your investment property was built after 1985 and/or the costs of construction are unknown. It’s an ATO requirement.
When the quantity surveyor comes to your property, they will measure, document, and photograph all qualifying items so you don’t miss out on any deductions. In fact, they will probably find things you didn’t even know were deductible.
When should I have a depreciation schedule created?
The best time to create a property depreciation schedule is as soon as you settle on a property. Doing it immediately after settlement will provide the most accurate values and reduce disruptions for any tenants that may be moving in. You should also create a depreciation report before and after any scheduled renovations on income-producing properties, as these renovations can provide significant tax deductions.
The best time to create a property depreciation schedule is as soon as you settle on a property.
The cost of preparing your depreciation report will vary depending on the type of property purchased, where it’s located, its size and other factors. However, don’t let costs deter you. With many reputable quantity surveying companies offering a money-back guarantee and fees that are 100% tax deductible – you have nothing to lose, and potentially thousands to gain.