We know that depreciation is the natural wear and tear of property and assets over time. And in good news, investors just like you can claim it as a tax deduction that could result in thousands of dollars back at tax time.
What is a tax depreciation schedule and who needs one?
A tax depreciation schedule is a document prepared by a specialist quantity surveyor. This schedule outlines every depreciation deduction available throughout the lifetime of the property.
If you own a rental property that is eligible for depreciation, you should get a tax depreciation schedule, or at least a depreciation estimate, to help with your decision. This will allow you to claim depreciation deductions each financial year when lodging your tax return, so you pay less tax.
When do you need a depreciation schedule?
Ideally, you will get a tax depreciation schedule after you make an investment property genuinely available for rent but before the end of the financial year.
This is important because depreciation is only available for properties that are genuinely available as a rental. However, you can still obtain a depreciation estimate prior to this so you have a better idea of the likely deductions available.
Getting this done before your first tax lodgement after the purchase of the investment property will ensure you can claim depreciation as soon as possible. This will provide a much-needed cash flow boost after your finances take the hit from the upfront costs of purchasing the property.
What happens if you get a tax depreciation schedule later?
Let’s say you purchased and rented out the property from the start of the 2021/2022 financial year but have only just realised you can claim depreciation. The good news is that it’s not too late to claim back dollars in missed deductions.
A tax depreciation schedule will give you the information needed to back-claim missed deductions in a compliant way.
How far back the claim can go varies. The schedule always starts from when you purchased the property and the ATO will usually allow you to back-claim for at least two years, sometimes more. The schedule gives figures for your accountant to amend previous tax returns, so you can adjust the taxable income with the applicable depreciation deductions for the given financial year.
Do you need a new tax depreciation schedule after a renovation?
This answer depends on the nature of the renovation. A substantial renovation can include removing and rebuilding entire parts of a property so it may need a new schedule.
A cosmetic renovation like renovating a kitchen, retiling a bathroom or replacing a hot water system will only need an update to the current schedule.
BMT Tax Depreciation can easily make updates to their existing schedules to ensure any addition or renovation is included where depreciation is concerned.
Now that you know why and when a tax depreciation schedule is needed to maximise cash from your investment property, contact BMT on 1300 728 726 or Request a Quote today.