Tax Depreciation Schedules

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Tax depreciation

 

What exactly is a Tax Depreciation Schedule?

 

“A Tax depreciation schedule is a legitimate deduction against taxable income, generated by the depreciation of a residential or commercial investment property over time.”

 

The property tax depreciation schedule legislation works by allowing property owners and investors a deduction of an annual percentage of the original costs on their investment property, over the effective life of that item. This tax depreciation schedule includes construction costs of plant and equipment, such as furniture and fittings. It also includes capital works such as the structure of the building.

Capital works: The capital works allowance is a deduction for the structural element of a building. This includes fixed irremovable assets; and is commonly referred to as the building write off. Depending on the age of the building you can claim either 2.5% or 4% of its historical construction cost as the following chart represents. Only some properties will qualify for this allowance.

Plant and Equipment: The plant and equipment element is a deduction for removable assets which are identified through ATO legislation as assets which depreciate at a faster rate than the building. Each plant and equipment item has an effective life and the depreciation available on that item is calculated accordingly.

 

Tax Depreciation schedules in itself then accounts for normal wear and tear on features of the property. Just like cars or computers, properties have a limited life span, and use thereof results in wear. A good example might be the need to replace the carpets in your home, every few years.

The Australian Taxation Office accordingly recognises that the value of capital assets gradually reduces over the effective life of a building. These assets are allowed to be written off as a tax deduction – and this is known as a Tax Depreciation Schedule.

Quantity Surveyors are qualified to estimate the construction costs of items specific to a building, as well as the life expectancy of each item. They then work within The Australian Tax Offices guidelines to calculate the amount of depreciation. A tax depreciation schedule created by a Qualified quantity Surveyor is then used by your accountant to claim depreciation on a property.

AQS is more than qualified to create your tax depreciation schedules. We have over 25 years of experience, and are registered members of the Tax Practitioners Board. The fees charged for your tax depreciation schedule from Accord Quantity Surveyors are 100% tax deductible.

Tax depreciation schedules

 

Tax depreciation

 

 

Detailed Tax Depreciation Schedules for:

 

 

Tax depreciation

 

 

Capital Allowance and Tax Depreciation Schedule Procedure:

1 Phone Accord Quantity Surveyors for a quote on 54739926, or alternatively complete the relevant tax depreciation form online:

 

2 Once the quote is accepted and our Tax Depreciation information forms are completed and returned, we will make arrangements for access to the property with your agent or tenant.
3 A staff member will inspect your property to measure the building and record all depreciable items of plant and equipment (including common areas).
4 Using recorded information obtained from the inspection and other relevant sources, Accord Quantity Surveyors will then complete your tax depreciation report detailing your depreciation claimable per tax year.
5 After a thorough procedure involving calculating and checking of all figures, the tax depreciation report is posted and emailed to you in pdf format. We suggest forwarding the tax depreciation pdf copy to your accountant. Keep the original in a safe place.

 

tax depreciation

 

 

Tax Depreciation Schedule Questions:

What Tax Depreciation schedule am I entitled to?
If you own an investment property, two areas of depreciation are available:

1. Plant and Equipment
2. Capital Works on the Building.

Different items within a rental property have different rates of depreciation based on the effective life of the item, which unfortunately makes a simple calculation impossible. Qualified Quantity Surveyors have the expertise and knowledge to know which items are depreciable and how savings can be made.

Whilst Plant and Equipment depreciation is more well known, Capital Works relates to the structure of the building, and can generally be calculated at either 0%, 2.5% or 4%, depending on the type of use and date of construction.

For more information on asset depreciation and what you can and can’t claim in your investment property contact us.

Why is a Tax Depreciation Schedule important?
Just like you can claim wear and tear on a car purchased for business purposes, you can also claim the depreciation of your investment property against your taxable income. All it takes is a qualified quantity surveyor to inspect your home and prepare a report for your accountant. The savings can be substantial. But every year, thousands of dollars go unclaimed by property investors who are none the wiser.
What is deductible under Capital Works Allowance?

Research shows that between 4 and 24% of the construction cost of a residential building is made up of plant and equipment articles. These include things like carpet, hot water systems, blinds, light fittings and many other items.

What is a Property Depreciation Report?
A property depreciation report (also called a depreciation schedule) sets out all tax depreciation and building write-off claims for a new or existing investment property. A property depreciation tax report provides a 10-year schedule for capital works allowance (building write-off) and depreciable assets (plant and equipment allowance) on an investment property, ensuring owners receive the maximum tax entitlements. Based on your allowances, the report calculates the amount you can deduct each year as part of your tax return.
What can a Tax Depreciation Schedule Report do for investors?
Claiming tax depreciation allowances on an investment property increases the tax benefits available to investors, thereby providing a greater return on their investment. Depreciation allowances, combined with additional negative gearing factors such as interest on a mortgage, repairs and maintenance, can help investors reduce their taxable income, pay less tax and improve cash flow. The savings made can then be redirected to other areas, such as an investment mortgage or other debt reduction. Accord Quantity Surveyors can help all owners achieve maximum tax benefits from their investment property, no matter the size or age.

For more information on how property depreciation can reduce your tax, please call us.

How does a Tax Depreciation Schedule help me?
Simple. A tax depreciation schedule improves your cash flow especially during the initial few years of your investment. The amount of depreciation effectively reduces your taxable income. Depreciation is known as a “non-cash deduction” because it’s the ONLY deduction that you don’t have to pay for on an ongoing basis – the deductions are in-built within the purchase price of your property. All other deductions, such as interest levies, will hurt your hip pocket on an ongoing basis.
Is my property too old to claim Property Tax Depreciation?
If your residential property was built after July 1985 you will be able to claim both Building Allowance and Plant and Equipment. If construction on your property commenced prior to this date, you can only claim depreciation on Plant and Equipment, but a tax depreciation schedule will still be worthwhile. Commercial and industrial properties are subject to varying cut off dates.

 

Tax depreciation

 

 

View a Tax Depreciation Explainer Video: