7 Things to Know About Your Tax Depreciation Schedule

Congratulations on your property investment! Now you need to understand how taxation works.

Did you know claiming depreciation helps in increasing cash flow from the property?

First, what is tax depreciation?

The Australian Taxation Office (ATO) allows businesses to list depreciation as an expense when reporting the income tax return for a given period. The amount helps with reducing your taxable income.

Every commercial and residential investment property has depreciation value; the tax regulatory authority outlines and compiles deductions in a report called tax depreciation schedule.

Here is what you need to know:

1.            You are entitled!

Owning an investment property is more viable than you imagine; all owners are entitled to numerous tax deductions, which directly reduce taxable income.

While there are council rates, maintenance costs, management fees, accounting fees, and insurance, among other deductions, the depreciation deduction is different because it is non-cash.

This means you don’t need to spend any money to claim depreciation deductions.

Most property owners miss this, yet it is an opportunity to minimize business expenses. Consulting with a Quantity Surveyor can help in maximizing claims and organizing the schedule.

2.            Classifications

The depreciation schedule has two categories; capital works and plants and equipment.

Capital works entail the original cost of the property, structures, extensions, and innovations. This forms a significant part of the schedule. Additionally, fencing, sheds, and paving, among other permanent assets, fall in this category.

Plants and equipment include non-permanent assets like furniture, appliances, flooring, and carpets.

The claim process involves inspecting the building and assigning a value to each asset.

3.            Days on Lease

As long as the property is available for lease, the Australian Taxation Office allows you to claim depreciation.

Even if you are a new owner of an investment property, you are still eligible for a claim. In this case, the claim will depend on the number of days the property has been available for rent.

When consulting with professionals and accountants, inquire about partial claims within the year and pro-data deductions depending on the lease period.

4.            Updating your depreciation schedule

After improving your property, you should engage a quantity surveyor to help prepare a comprehensive claim.

Do not confuse repairs and capital work improvements; the claim procedure for the two is different, hence the need for a professional to ensure your deductions are correct.

Typically, you can claim repair costs in the same financial year of completion. On the other hand, improvements in the original premises are capital, thus prone to depreciation. Therefore, it is crucial to capture all the new assets in the improvement process to update the depreciation schedule.

The status of the depreciation schedule affects the deduction claims hence the need for regular updates whenever there are changes on the property.

5.            Consult with Professionals

While your accountant may not specialize in tax rulings as per the ATO depreciation policy, he or she will help arrange a schedule and refer you to a quantity surveyor.

The Australian Taxation Office mandates Quantity Surveyors to estimate costs for depreciation. After completing the depreciation schedule, your accountant has to input the deductions into the property’s income tax return.

Besides accuracy and convenience, professionals will ensure you don’t get into problems with ATO.

6.            Previous Year Claims

Don’t worry if you are learning about this now!

Property owners miss claiming depreciation deductions for several years because of ignorance, but there is good news!

The ATO allows adjustments years after the first submission, meaning you can submit an amendment application for the missed depreciation deductions.

You can make adjustments on the depreciation schedule in previous years, as long as the property was available for lease.

7.            When to order for a depreciation schedule

To maximize your returns, strive to get your depreciation schedule before the end of the financial year.

You need to pay a one-off cost to get a depreciation schedule; the fee lasts forty years. The primary purpose of this fee is to cover your property and ensure property owners are accurate with the claims.

Getting your depreciation schedule before the end of the financial year means you can immediately claim the fee hence maximizing your returns.

Besides, working out the schedule early in the year allows you to write off any non-permanent assets like equipment that value below three hundred dollars.


Eric Reyes is a passionate thought leader having been featured in 50 distinguished online and offline platforms. His passion and knowledge in Finance and Business made him a sought after contributor providing valuable insights to his readers. You can find him reading a book and discussing current events in his spare time.