Tax Depreciation Schedules
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.
Detailed Tax Depreciation Schedules for:
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 Schedule Questions:
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.
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.
For more information on how property depreciation can reduce your tax, please call us.
View a Tax Depreciation Explainer Video: