A depreciation schedule is created once and is valid for forty years from the date of settlement. However, property investors may alter their tax depreciation schedule if they make extensive structural modifications to the property or renovate it extensively and replace many of the original furnishings and fittings.
If at all feasible, you should establish the depreciation report as soon as possible after the settlement. As a result, the quantity surveyor will be able to view your property in its natural form. If the renter hasn’t moved in yet, it’s also a plus since this will minimise interruption.
Note that your accountant is not authorised to estimate the building expenses if your home was constructed after 1985. Quantity surveyors have been designated by the Australian Taxation Office (ATO) as being appropriately competent to produce a reasonable estimate of construction costs where such prices are unknown. This estimate cannot be made by real estate agents or property managers.
How will the quantity surveyor determine the depreciation of the property?
Site inspections are required to meet ATO regulations; therefore, all depreciable objects will be documented and photographed by a skilled quantity surveyor. This ensures that you don’t lose out on any tax breaks. In the case of an audit, the paperwork may be utilised as proof.
Categories of depreciation schedules
Capital works and plant and equipment depreciation schedules are the two types of depreciation schedules. The property itself and any improvements to the building are considered capital works. Capital works depreciation includes improvements done to the kitchen, carpeting, and even the patio.
Plant and equipment refer to assets that can be readily transported out of a house or business. White goods, furnishings, electrical, and even trash cans are included in the package. Some investors struggle with this category because they are unaware that they may claim trash bins as an immediate write-off.
Property investors also don’t have to bother about calculating depreciation in their tax filings. The investor’s accountant may take care of the remainder after the quantity surveyor has concluded their work. Investors utilise the timetable as a guide to ensure that their returns are correct. They’ll do all they can to ensure that their customer pays the least tax and receives the more significant return feasible.
Is an inspection necessary for my depreciation schedule?
In the past, inspecting investment properties was an essential element of the depreciation schedule preparation process. For specific properties, an inspection is still the best approach to guarantee that all capital works and assets are correctly recorded to maximise the owner’s tax deductions.
While creating depreciation schedules for brand new properties is normal without a site inspection, second-hand homes are often viewed in person to take pictures, take measurements, and evaluate required work.
What is the purpose of a tax depreciation schedule?
If you’re purchasing an investment property, you should have a tax depreciation schedule produced for your accountant so that you may take advantage of the tax advantages. Call us at 1300 313 524 for more information on tax depreciation schedules.