Buying investment properties in Perth? It’s important to consider ordering a tax depreciation schedule.
What is A Depreciation Schedule?
It is the amount of depreciation over the useful life expectancy (commonly known as “wear and tear”). It is used primarily in accounting for assets, such as real estate. It is only applicable to a building and not the land the building is on.
Depreciation is calculated by either a time period or the specific amount of usage of an asset. The older a building is, the more it depreciates in overall value. Depending on the type of property and when it was built, a property’s useful life ranges from 25 years to 40 years, according to the Australian Taxation Office.
In order to apply a depreciation schedule to your property, the property must first be properly analysed by a qualified quantity surveyor (QS) who specialises in tax depreciation. These are professionals trained in the techniques of cost control, value management, valuation and risk analysis, to name a few. A quantity surveyor will be able to provide a reliable depreciation schedule for your property, ensuring that you get the most out of your tax dollar. Surveying the investment property need only be done once – that is, unless your property is demolished and renovated, whereby you will need to obtain an updated report.
Your investment property will provide you with tax deductions, no matter the age of the building or its fixtures. Benefits will also vary depending on the type of building. However, a depreciation schedule report should always be conducted prior to any renovations to your property.
Scrapping during renovation or demolition will also allow you to claim depreciation on the tangible items removed from the property, such as appliances, fixtures, carpeting, tiling, water tanks, and the like. Reporting these items on the depreciation report can mean saving thousands in tax dollars.
Even if the property was renovated prior to your ownership, you may still be able to claim deductions. Considering you purchased an existing or older property and it has had improvements to the original building structure, you may claim for the historical costs.
Obtaining a depreciation report can help investors over time reduce their taxable income, pay less tax and improve cash flow.