What Is a Depreciation Schedule?

A depreciation schedule establishes the current value of an asset, based on a starting value and periodic depreciation. The depreciation schedule helps you determine whether repairs and maintenance make good decisions and economic sense at any specific point in the life of the asset. You should get the depreciation schedule prepared straight after settlement, if possible. That way the quantity surveyor will see your property in the true state of what you have purchased. And if the tenant hasn’t moved in yet, that’s a plus, as it will avoid disruption. The good news is that you only need to have the depreciation schedule prepared once and not every year as some people think. A tax depreciation schedule is simply a report detailing the depreciation entitlements available to you within your investment property.

The depreciation entitlements can be broken into two simple categories:

Capital Allowances (Division 43)

Capital allowances are based on the historical construction cost of the property, excluding the value of plant and equipment assets, which we’ll come to in a moment. Capital allowances can be claimed on your original residential property, where it was constructed after the 15 of September 1987, or on any subsequent qualifying renovations or improvements completed by either the previous owner or yourself.

Plant & Equipment Items (Division 40)

Plant & equipment items are generally ‘loose assets’ or control panels for automated systems as defined by the Australian Taxation Office (ATO). The ATO publishes a list of these assets every year around July. In a residential property, the most common plant assets are:

·         Bathroom Things

·         Exhaust Fans

·         Hot Water Systems

·         Carpets

·         Vinyl

·         Blinds

·         Curtains

·         Air conditioners

·         Door Closers

·         Security Systems

These assets are estimated as part of a depreciation schedule and you will basically be able to claim between 100 percent and 20 percent of the estimated residual value each year. Each plant and equipment item has a different depreciation rate. The cost of preparing a depreciation schedule varies according to the type of property you’ve purchased and its important factors are location, size and numerous other factors. Typically, you will find most of the leading quantity surveying companies offer a money-back guarantee that says you will save twice your fee in the first year or they give you the report for free. Quantity surveyors’ fees are also full tax deductible. Depreciation schedule is a necessary tool that every property investor or business owner must have if they want to pay less tax and recover debt faster. It has been rumored that in most people up to 80 percent of investors don’t know that they can depreciate their investment property and some don’t even understand what depreciation is. Claiming the property and the items inside it on your tax return will give you a higher return, but not right away. Items depreciate over time, and their depreciation costs will increase the longer an investor owns them because they’re given a ‘lifespan’ for their usefulness.