Property Depreciation: All Your Questions Answered
With tax time looming just around the corner, it is important that you ask all the relevant questions in order to ensure you are getting the most out of your investment property. In today’s article, we have a look at 10 commonly asked questions about property depreciation, so strap yourself in and read on to find out more!
- What Is Property Depreciation?
As an asset ages, items within it wear out and lose their value. The Australian Taxation Office (ATO) permits for property investors to claim a tax deduction relating to the building and its fixtures. Property depreciation can be claimed by anyone who owns a brand new income-generating property, thus reducing your taxable income for the year. Investors can simply utilise an
- What Are Common Deductions I’m Entitled To?
Deductions are often split into two categories – capital works deduction and plant and equipment depreciation. Capital works is a blanket term for expenses such as a building or extension – for example, altering a building, knocking a wall down or building a pergola. Plant and equipment depreciation refers to the deductions claimed for the
- What is a Depreciation Schedule?
A tax depreciation schedule is a report which will outline any depreciation allowances that an investor is entitled to. Your report will contain information such as the breakdown of all building allowance costs, the breakdown of all plant and equipment costs and the rates at which you can claim your returns.
- Do I Really Need a Depreciation Schedule?
For anyone who is looking to
- When Should I Create My Depreciation Schedule?
Ideally, your depreciation schedule should be created as soon as you settle on an investment property. Doing it as soon as possible will enable you to provide the most accurate values to prevent any disruptions down the line.
- Do I Need To Update My Property Depreciation Schedule?
If you have made any upgrades or renovations to your property over the last financial year, it is advised that you liaise with your
- How Long Does a Depreciation Schedule Last?
Based on ATO regulations, a depreciation schedule has a shelf life of 40 years from the date construction was completed.
- Can My Accountant Handle Depreciation Deductions?
Unfortunately, the simple answer is no. Only a licensed quantity surveyor is able to assist you in depreciation deductions. Only once your surveyor has prepared your depreciation schedule will you be able to hand it over to your accountant to input deductions into your
- What if I Haven’t Been Claiming Depreciations?
Fret not, because your quantity surveyor will be able to backdate your tax depreciation schedule to the initial date of settlement. Don’t forget that once this is done, you should also consult your accountant who will be able to make
- Can I Use The Estimate Provided By The Developer?
Short answer — no. A sample estimate that is provided by the developer is often just used as a marketing tool to show investors what they might expect to claim should they choose to purchase a property. Most of the time, the estimate isn’t actually specific to your property and may not contain all depreciable items or claims that you will be able to make. Be sure to not shortchange yourself by consulting a quantity surveyor who will be able to assist you in maximising your return on investment.
And there you have it — 10 of the most asked questions with regard to property depreciation. We hope that this article has given you some useful insight into property depreciation and the claims you can make in order to fully maximise the return on your investment property.