A tax depreciation schedule is something that every property investor should be aware of in order to take full advantage of depreciation deductions that are available to them. Unfortunately, research shows that over 70% of investment property owners don’t buy a tax depreciation schedule, resulting in thousands of dollars worth of deductions that end up lining the pockets of the taxman instead. Today, we dive into exactly what a tax depreciation schedule is and why you need one as a property investor, so read on to find out more. Check out Tax Depreciation Schedules.
Before diving into exactly what a tax depreciation schedule is, it is important to understand exactly what depreciation is. In a nutshell, depreciation in value of an asset is a natural occurrence as time progresses. Wear and tear and other factors lead to a depreciation in value which investors stand to benefit from. The Australian Taxation Office (ATO) allows owners of brand new income-generating properties to claim this depreciation as a tax deduction.
When it comes to deductions, they can be divided into two distinct categories: division 43 capital works allowance and division 40 plant and equipment depreciation.
Capital Works Allowance – The capital works allowance is able to claim for wear and tear. This occurs to the structure of the property. Generally, any residential property that was built after the 15th of September 1987 will entitle its owner to capital works allowance at a rate of 2.5% per year for up to forty years.
Plant and Equipment Depreciation – Plant and equipment depreciation can be claimed for the removable fixtures and fittings within the property.
Now that we understand depreciation, let’s talk about the tax depreciation schedule. The tax depreciation schedule is a legal document that is drawn up by a licensed quantity surveyor and contains information about depreciable assets that are found within your property.
Maximise your annual deductions. It is important that you purchase your depreciation schedule prior to the end of the financial year. Own the property for an entire financial year? This is order to be eligible to claim a partial deduction.
Failing to organise your tax depreciation schedule can result in the loss of thousands of dollars. I hope you learned about Tax Depreciation Schedules. Finally, check out other articles like this on our frontpage.