Tax Depreciation Schedule: Understand the Basics
by Pablo Chevalier
Investing in property is a wise financial move that can secure your financial future. Various factors come into play when buying or renting property. One of these factors is property depreciation. As property ages, fixtures and assets wear out and decrease in value. The Australian Tax Office (ATO) allows building owners to claim this wear and tear or depreciation as a deduction against their assessable taxable income. However, to have assets written off as a tax deduction, one must prepare and present a tax depreciation schedule.
What is a tax depreciation schedule?
A tax depreciation schedule is a schedule prepared by quantity surveyors. It indicates the value of all the assets within a property. With this report, the ATO allows property owners to deduct a portion of the original cost of assets and capital works from their taxable income. The deductions are effected each financial year over the life of that particular asset.
What does property depreciation entail?
Property depreciation is broken down into two categories:
- Plant and equipment
- Capital works
Plant and equipment include all loose assets within the property such as appliances, floor coverings, security systems, and furniture and fixtures. Capital works include the building and other structures within the property, fencing, and paving among others. Costs incurred during renovation are also allowable against income. A quantity surveyor will assess and determine the value of all assets that fall under these categories to claim deductions.
Why do you need a quantity surveyor?
Every asset within your property is assigned a life, for example, a piece of furniture could have a usable life of ten years. It means that the furniture will be depreciated at a given percentage every year for ten years. While the ATO has the knowledge about this, they may not be able to determine the actual value of your assets. Quantity surveyors come in at this point.
Quantity surveyors have the technical know-how of accurately assessing and inspecting property and assets to determine their actual value. To get a tax depreciation schedule approved, you will need their services. However, due to the chances of surveyors over-valuing items, the ATO requires that surveyors be registered with the Tax Practitioners Board for accountability of survey work. When choosing a quantity surveyor in Australia, always ensure they are registered with this board.
How much depreciation can you claim?
The amount of depreciation you can claim will be dependent on various factors such as the type of building, its age, use, and assets within it. Once the depreciation report has been prepared, you can be able to determine the amount you will save during that financial year.
Tax depreciation is an allowance on income that every property owner should claim. With this understanding, you should get a quantity surveyor to prepare your tax depreciation schedule and start enjoying these deductions.
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About Me
Hi, my name is Kerry, and recently, I helped my mum set up her own business. She had always dreamed of buying things at charity shops and auctions and then selling them. However, with her advancing age and mobility issues, traveling to boot sales or flea markets wasn't an option anymore. Luckily, the internet made it easy for her to set up a shop she can run from her home, and I help her get to the charity shops and auctions to stock her online store. However, I have also had to help her with a lot of accounting things. If you are thinking about starting a business or helping a loved one, you need to check out these accounting ideas and tips.