Tax Depreciation
Schedule Canberra

The Australian Taxation Office (ATO) allows investment property owners to claim deductions on the fair wear and tear on an investment property and its fittings. Tax depreciation is essentially a non-cash deduction. You don’t necessarily have to directly incur the expense to be able to claim tax deductions, you can inherit deductions upon acquisition of the property (different rules apply for residential properties purchased post 9 May 2017). Tax depreciation is split into two categories; Division 43 Capital Works Allowances (the building itself) and Division 40 Plant and Equipment (eg. carpets, blinds, A/C, ceiling fans etc.)

Tax Depreciation helps; 

• Reduce your taxable income which results in more cash in your pocket 
• Increase your cash flow which could enable you to buy your next investment property sooner 
• Provide a greater financial return for your investment supporting your financial freedom  

Division 43 Capital Works Allowances (the building itself) – bricks, roof, framing, windows, doors, plaster, kitchen cabinetry. 

Division 40 Plant and Equipment (carpets, blinds, A/C, ceiling fans, kitchen appliances etc). 

In residential division 40 is only allowed on new properties, or assets purchased by the current owner as new if the property settled post 9 May 2017. You are not allowed to claim a division 40 deduction for second-hand assets when the property settled or became income producing post 9 May 2017. 

Anyone who owns an income producing property. Tax depreciation is not available on your home/primary place of residence (PPOR). 

Depreciation tax deductions are available to residential property investors whose investment property was built after 15 September 1987, commercial properties when built after 20 July 1982 and any refurbishments/renovations/improvements from 27 February 1992. Owners do not have to know when these works were undertaken -- this is researched by the tax depreciation provider who is qualified to estimate construction costs and asset values. Plant and equipment depreciation is also available on all new buildings and all existing properties when purchased prior to 10 May 2017. In summary, 99.9% of investment properties will be entitled to some form of depreciation deduction.

Yes, the structure of an investment property has an effective life of 40 years and tax depreciation can be claimed on an investment property that was built post-September 1987. Another tip that could save investors thousands is that their Accountant can help claim tax depreciation retrospectively, amending up to the past two financial year tax returns and making the most of depreciation deductions that may have been lost through not claiming. It is completely legitimate and the ATO actually encourages people to do this. 

Yes, and this is where Quantity Surveyors can add serious value with a rental property depreciation schedule. It does not matter if the works were undertaken by a previous owner. When an investment property is purchased the property investor has also purchased the entitlement to make a depreciation claim on all of the property’s improvements.

Most houses 10+ years old will have had works done. The most typical being: 

• Bathroom – commonly worth up to $25,000 
• Kitchen – commonly worth up to $30,000 
• Floor & Wall Tiles – commonly worth up to $10,000 

On a 10-30 year old property there is $65,000 right there which could be detailed in a tax depreciation schedule. 

If a client is about to renovate an investment property it may be worth recommending a pre-renovation inspection. This inspection allows a Quantity Surveyor to identify what assets or capital works are going to be demolished or thrown out. Value can be assigned to these assets and they can be written off as an immediate tax deduction. A pre-renovation inspection and ‘scrapping report’ can save thousands which can offset the loss made through the renovation period. 

Quantity Surveyors are recognised by the Australian Taxation Office (ATO) as the most suitably qualified professional to estimate the depreciable expenditure spent on the property prior to its purchase, as well as the value of the fittings and equipment within the property.  In accordance with ATO Tax Ruling 97/25, if a residential investment property, for example, was constructed after September 1987 and/or construction costs are unknown, a registered and qualified Quantity Surveyor must be engaged to produce a commercial or residential tax depreciation schedule. Unfortunately, an Accountant cannot do this for investors. 

Our investment property depreciation schedules start from $600 + GST.

We’ll provide you with one tax depreciation schedule that lasts up to 40 years of claim and the fee is 100% tax-deductible. We can also undertake a retrospective tax depreciation schedule if you haven’t been claiming deductions so that you don’t miss the tax benefits for your commercial or residential investment properties.

To find out how much a depreciation schedule costs for your property, add the details using the link below to receive your obligation-free quote.

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