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31

May

2014

Tax Depreciation Schedule

I mentioned last newsletter about the cost to own a rental property. Part of the process was to get a depreciation schedule for your investment property whereby you could claim a tax deduction and hence offset some of the costs associated with your property. A depreciation report (also called a depreciation schedule) sets out all tax depreciation and building write-off claims for a new or existing investment property.

Most depreciation tax reports provide either a 25 or 40-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.

//homerentals.com.au/sc/default/img/cost.pngAs mentioned there are 2 parts of this report. The first part is the capital works allowance. The government allows you to claim the cost of construction of your rental property usually over a period of 40 years. This is only valid for properties built after 22 August 1979. Let’s assume the property you purchased cost $400,000 to build. At 2.5% per year, you can claim $10,000/year for 40 years as a tax deduction on this part of the schedule. There are of course some rules and other parameters associated with this allowance, where either your accountant or a qualified quantity surveyor can clarify these for you.

The second part of the schedule is the depreciable assets or plant and equipment allowance. The government allows you to claim the costs of some of the furnishings and other assets of the property over shorter terms as a tax deduction. These items can include things such as Curtains, blinds and carpets as well as whitegoods, hot water systems and the like. Most deductions are at a rate of 10-20% so for the first 5-10 years of owning your investment property you will be able to claim these deductions. For example, if the cost of all these items in your rental property adds up to a total of $50,000, at 10% deduction, you would have a claim of $5000/year on this part of the schedule for 10 years.

This is a very simplified method of explaining what this schedule is all about. There are also 2 methods of claiming these deductions from the government where again your accountant or quantity surveyor can explain the best method that fits your circumstances. 

There are many reputable companies who will do this schedule with costs ranging from $400 - $650. Be aware the cheap options. Sometimes you get what you pay for!

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