Calculating Tax Depreciation

Calculating Gold Coast tax depreciation can be sometimes confusing and time consuming process because of the complexity of the rules and the need to roll forward calculations on a year by year basis. Because of that, many prefer to live the task of working Gold Coast tax depreciation to their tax agent but it can’t do any harm to learn and understand them for ourselves. The cost of an item for the purposes of working out your depreciation includes the amount you paid for the asset, plus any additional costs you incurred in transporting and installing the asset and costs relating to getting the asset into a useable condition such as repairs. You can only claim depreciation to the extent that the asset is used to earn your assessable income. If the asset is also used for private or domestic purposes, you’ll need to apportion the depreciation charge and can only claim the work or business related element for instance, if you purchase a computer and use it half for your job and half for private purposes, you can only claim depreciation on half the cost. You must claim depreciation on assets you keep in your business for longer than a year. These are known as capital expenses or fixed assets. Each year, your assets depreciation amounts are deducted from your assessable income along with your other expenses to calculate your taxable income. Each method has its own merits. While the Diminishing Value method allows you to claim twice as much depreciation in the first year (the difference being the 200 percent as opposed to the 100 percent used in the Prime Cost formula), it is calculated on a base value that gets smaller and smaller each year. As a result, the deductions get lesser and don’t actually reduce down to zero. That said in comparison to the Prime Cost method, the Diminishing Value method will allow you to claim more initially, less later on, and you won’t be able to claim the full amount. Many businesses use the Diminishing Value method in order to maximize tax deductions early in the asset’s life, close to when the initial cost is incurred.

Typically, an application for preparing a tax depreciation schedule should be submitted as soon as the settlement is done or the owner’s move out such as changing own residence to investment property. This will maximize the allowable deductions and the accuracy of the report is greatly improved. DIY reports are not accepted by professional institutes. These institutions have produced guidelines for the preparation of tax depreciation reports by qualified quantity surveyors, which are aimed at ensuring that property owners get a comprehensive and professional report that meets the ATO ‘s requirements. Owners who attempt to estimate their own depreciation, or use non-quantity surveying qualified people risk submitting an incomplete or poor depreciation report which could not only cost them in missed deductions but could also possibly attract an audit by the ATO if their report is not up to the standards required.