Not sure what a rental depreciation schedule is? Get excited… depreciation is typically one of the largest tax deductions a property investor in Australia can claim each year, and a depreciation schedule helps to ensure you are maximising those tax deductions.
In this article we look at:
- What is a depreciation schedule in Australia?
- Why do I need a depreciation schedule?
- What is in a depreciation schedule?
- Where do I get a rental property depreciation schedule?
- What do I do with a rental property depreciation schedule?
- How much does a rental property depreciation schedule cost?
- How to ensure your rental property depreciation schedule is compliant and the best value:
- Do Accountants do depreciation schedules?
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What is a depreciation schedule in Australia?
A rental property depreciation schedule is a report that clearly calculates and details the tax deductions a property investor can claim for the annual depreciation of their investment property (building and assets, not land).
Across the investment property community, a depreciation schedule can also be known as:
Capital Allowance and Tax Depreciation Schedule; or
Rental Property Depreciation Report
Read on below for more details…
Why do I need a depreciation schedule?
Rental property depreciation schedules assist investors to claim the maximum tax deductions available for the annual depreciation of their investment property (referred to as capital allowance and depreciation by the ATO). Annual deductions are typically in the thousands of dollars every year, for up to 40 years.
Specifically, a property depreciation schedule will:
- ensure that your claims for capital allowance (Division 43) and plant and equipment assets (Division 40) are claimed in accordance with ATO legislation;
- save you time and effort in trying to calculate these deductions for yourself;
- save you money with your accountant, as they simply apply the results from the schedule;
- ensure that your deductions are maximised to create the greatest cash flow result for your investment.
What is in a depreciation schedule?
Quality investment property depreciation schedules will include all construction costs and assets, including previous renovations (whether completed by yourself or a past owner), as well as claim more aggressively for low cost and low value assets. There is a big difference between the standard inclusions of a cheap depreciation schedule and a more expensive one.
A Capital Claims Tax Depreciation Schedule has all of the inclusions that help you to maximise your deductions such as:
- Individually itemised asset values;
- Identification and separation of staged capital works and improvements;
- 40 years of forecasted deductions;
- Reporting of both diminishing value and prime-cost methods of depreciation, as well as graphing of the results for easy comparison;
- Pooling of low-cost and low-value assets to speed up depreciation claims in the earlier years;
- Inclusion of immediate write-off assets;
- Scrapping/disposal of assets where applicable;
- Itemised depreciation of Division 40 assets for application against CGT at sale.
Where do I get a rental property depreciation schedule?
Quantity Surveyors are one of the few professions recognised by the ATO to estimate historical and current construction costs, as well value the included assets. To purchase a depreciation schedule simply contact a quantity surveyor for a quote.
Once you select your provider, a rental depreciation schedule can usually be purchased quite simply over the phone or online. Good quantity surveyors like Capital Claims Tax Depreciation will assess your property online first to ensure value for you, undertake all the necessary property searches, arrange the inspection via your property manager and tenant and complete a thorough inspection. Inspections may not be necessary for brand new buildings where plans and inclusions are provided.
What do I do with a rental property depreciation schedule?
You deliver your depreciation schedule to your accountant and they will apply the results in your tax return for that year, and for all the years going forward. If you do not use an accountant, you can apply the results yourself when completing your tax return. Keep in mind that once you select a depreciation method from the report (Prime Cost or Diminishing Value) you must stick with that method for all future tax returns.
How much does a rental property depreciation schedule cost?
Whilst there can be a substantial difference between the quality and results of a cheap depreciation schedule and a more expensive one, thankfully the difference in cost is minimal, especially when you consider the cost is 100% tax deductible.
A cheap report can cost a few hundred dollars, but will likely require you to inspect the property and provide a lot of information yourself. This can be very inconvenient and expensive for many people, not to mention that most people are not sure what to look for. These schedules are not likely to factor previous renovations and improvements or apply low cost and low value pooling for better results.
More expense reports are only a few hundred dollars more (up to $800 with some providers). These schedules are far more convenient, and will generate a far better result for the investor. A few hundred dollars extra up front can mean tens of thousands of dollars more deductions in the future.
How to ensure your rental property depreciation schedule is compliant and the best value:
- Ensure your Quantity Surveyor is a registered Tax Agent – registered with the Tax Practitioners Board of Australia;
- Use a specialist provider – not all quantity surveyors are also tax depreciation specialists. A specialist knows not only construction costing but tax legislation as well;
- Ensure your report includes the features listed above;
- Check out your provider so you can feel more confident they will still be around in a few years in the case of an audit or lost schedule.
It is a great idea to request a sample report and ensure your report is easy to read and understand – or your accountant may have to re-work the results at your cost!
A Capital Claims Tax Depreciation Schedule meets all of the above and more! We also offer:
- a free desk-top feasibility assessment of your property first;
- free updates for installation of new assets;
- .csv files for no extra charge;
- split reports for multiple owners;
- printed copies when requested for no extra charge.
We believe we represent the best quality and best value rental depreciation reports in the industry across Australia.
Do Accountants do depreciation schedules?
Accountants are not qualified to estimate construction costs, which encompass more than just materials and construction labour. For instance, they are not qualified to estimate the construction works and associated costs with previous works throughout the property’s lifespan. Our research indicates that accountants who do not utilise a professionally prepared tax depreciation schedule tend to be more conservative in their depreciation claims, resulting in potential deductions worth thousands of dollars being lost for the investor. To maximise your depreciation claim, it is recommended to have a depreciation schedule prepared by a qualified quantity surveyor.
Accountants love our depreciation schedules
Capital Claims’ knowledge and applied experience has assisted many of our clients improve their after tax position. Whilst we have found the Capital Claims team to have a detailed approach to preparing depreciation reports; we have also found their ability to look at the whole picture allows us to assist our clients with their property portfolios and wealth creation. – Paul Siderovski, SiDCOR
As an Accountant I found Capital Claims professional, priced well and very efficient. Their depreciation reports are first class. My clients are also happy with the service and reports. – Michael O’Hehir RSM Bird Cameron
To find out what deductions you might be entitled to for depreciating your investment property click here. Or you can call and speak to one of our friendly experts on 1300 922 220.
Related articles:
What tax deductions can I claim on my rental property this financial year?
What is Division 43 or Capital Works?
Can investors claim depreciation on second-hand properties since the legislation change in May 2017
