[Video] Why You Should Get an Investment Property Depreciation Schedule

An investment property depreciation schedule is among the most beneficial but underused tools available for property investors to maximise their tax returns. All property investors want to pay less tax, yet 70% of investors don’t benefit from tax depreciation deductions because they don’t order an investment property depreciation schedule.

The video below has our Lead Mortgage Broker, Liz Zaki discussing the issue with George Nguyen from Duo Tax, Australia’s most reviewed and highly-rated Quantity Surveyors.

The video will guide you through what you need to know about ordering an investment property depreciation schedule including a brief introduction to property tax depreciation, the benefits of a tax depreciation schedule, what it includes as well as how you can get your hands on one.

What Is Rental Property Tax Depreciation?

Before equipping you with the benefits of an investment property depreciation schedule, you must understand property tax depreciation. As a building gets older, its structure and the assets within the building are subject to general wear and tear. In other words, each year, the value decreases and thus, “depreciates“.

The ATO offers property investors the opportunity to claim the depreciating assets as a tax deduction, as long as the property is being used to generate an income. There are two types of depreciation deductions available for property investors to claim:

Division 43 – Capital Works

• Capital works refers to the depreciation (i.e. the general wear and tear) of the structural components of a property including:
  • bricks and mortar;
  • retaining walls;
  • flooring; and among other things
  • electrical wiring
• The structure of a residential building, if constructed after September 1987, generally has an effective life of 40 years. So, property investors can claim a capital works deduction at a percentage rate of 2.5% per annum over those 40 years

Division 40 – Plant and Equipment

• The term “plant and equipment” refers to the fixtures and fittings found within the building. These are generally known as easily removable assets and include items such as:
  • carpets;
  • stovetops and ovens;
  • blinds; and among other things
  • air conditioning units
• Plant and equipment assets depreciate over their effective life. According to the ATO, the effective life of a depreciating asset is how long it can be used to produce an income. For example, a carpet, subject to a fair amount of wear and tear, has an effective eight-year life.

What Is an Investment Property Depreciation Schedule?

To claim your investment property’s depreciation deductions, you’ll have to identify the value of the property and all its fittings and fixtures. To do this, you will have to consult with a quantity surveyor like Duo Tax. A quantity surveyor is a qualified construction expert who specialises in the assessment of construction costs of property.

Not only do quantity surveyors specialise in construction costs, but they are also recognised by the ATO as one of the few expert professions qualified to compile an investment property tax depreciation schedule for both residential and commercial property investors.

The investment property depreciation schedule is the report compiled by the quantity surveyor that details the value of both your Division 40 and Division 43 assets and how much they have depreciated and will depreciate in the future.

Use the code ONESITE when you contact Duo Tax for your Investment Property Depreciation Schedule and you will get a discount on their retail price.