SCC Chartered Accountants

   

Appreciating the benefits of depreciation

If you own an investment property, a depreciation schedule will more than likely offer you some benefits.

Depreciation is often missed by investors, but it is a legitimate tax deduction. Depreciation is the process of devaluing assets as they decrease in value over their lifetime until reaching the end of their useful life.

If you have an investment property it can be depreciated and you are deemed to benefit from the process significantly. Most investment properties qualify and the process allows property owners to claim tax deductions through the ‘wear and tear’ of their properties and items within.

Depreciation is available for investment properties, both new or second hand. Included are items such as floor coverings, blinds, water tanks, air-conditioning and white goods etc…

What is a depreciation schedule?

A Tax Depreciation Schedule is a professionally produced document highlighting items that may be depreciated. It incorporates the value of each depreciable item, including delivery costs, installation costs and other associated costs.

The Tax Schedule allows property investors to claim deductions on different assets and offset their overall taxable income.

Who can complete a depreciation report?

Australian Tax Office (ATO) have made it a requirement for all property investors to have a depreciation report undertaken by a Qualified Quantity Surveyor. The Qualified Quantity Surveyor will evaluate the site and provide conclusive data in which the schedule is based on. The report is reviewed by the ATO when investors claim tax deductions for depreciation on their investment properties.

What is a qualified quantity surveyor?

A Qualified Quantity Surveyor is an independent professional consultant to the property and construction industries, offering advice to investors, builders, developers, financiers and private clients.

Benefits of a tax depreciation schedule

As mentioned, a Tax Depreciation Schedule can reduce an investor’s taxable income. The flow-on affect by claiming these deductions is investors can significantly enhance and generate a healthier cash-low situation.

In other words, the actual return on the investment property increases when the impact of depreciation is taken into account.