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.
Hello, I am settling on an apartment in an older 1970s block which I will rent out after some repairs and upgrades. Is it better to have a QS cease a depreciation schedule before renovations then adjust it after, or just wait until after? For example can I enjoy an upfront deduction when I replace the existing windows, if the windows were installed after 1987?
Also, does a QS assess items like the compound’s newly-installed security gates, partially paid by the vendor of this apartment?
Thanks in advance – Alex
Hi Alex,
Thanks for your comment.
It’s important to consult a specialised quantity surveyor before and after any renovations to determine the best outcome for each circumstance. This is so all assets can be correctly identified and either scrapped or claimed as a deduction or form part of the cost base.
Because you’re conducting repairs and upgrades before renting out the property, you can’t claim a deduction for the items removed and scrapped. However, you can claim the new assets moving forward over their effective life.
You can also claim depreciation on any prior structural renovation works for the apartment and common areas.
Any common assets like security gates are included in a tax depreciation schedule. The deduction amount is determined based on the proportion of ownership.
For more information contact one of our depreciation specialists on 1300 728 726 or Request a Quote.
Thanks,
The BMT Team.
I was a customer of BMT. I got Capital Allowance and Tax Depreciation Schedule from BMT in 2016. I split 50% and my wife split another 50%. These 40 years total deductions include the division 43 and division 40 components.
Over the time we owned the investment property, we claimed deductions as Schedule. But 2022-23 financial year, I earned an income less than $18200( my marginal tax rate is 0%). Can I choose the deduction amount shown as Schedule aren’t claimed this year? And my wife still claims the deductions?
In the future, will the cost base of CGT applicable not be reduce if the amount that aren’t claimed this year ?
Hi Zhuo,
Thanks for your comment.
In scenarios where an individual’s income is within the tax-free threshold, tax deductions, including depreciation, can’t be claimed as there isn’t a taxable income to claim against.
Your wife will only be able to claim her portion of the deductions against her taxable income.
As we’re only specialised in depreciation, we recommend consulting your accountant or financial adviser for advice specific to your scenario.
Thanks,
The BMT Team.
We have a BMT depreciation schedule and have been claiming depreciation for many years. However, we don’t WANT to continue claiming now that we are retired because there is no tax benefit, and depreciation claimed affects the CGT calculation when we sell. Do we HAVE to continue claiming depreciation?
Hi Sharon,
Thanks for your comment.
No, you don’t have to continue claiming depreciation. However, there may be considerations around the cost base and CGT in the future for any unclaimed deductions where there was a possibility to claim them based on ATO guidance.
We recommend confirming your intentions with an accountant or financial adviser.
Thanks,
The BMT Team.
Is it worth getting it done under below circumstances
apartment built 1999
Purchased 2013
I am living in the property but planning to rent it out in 2023 .
Thanks
Hi Raj,
Thanks for your comment.
It would be worth ordering a tax depreciation schedule for your property.
While the plant and equipment assets (Division 40) won’t be eligible for depreciation deductions as you have lived in the property, capital works deductions (Division 43) are available which typically make up 85-90% of depreciation claims.
If you would like to get it touch, call us on 1300 728 726 or Request a Quote.
I don’t believe I will be able to claim depreciation on an investment property I recently purchased but thought might be worth checking. It is a 1970’s block.
Hi Rhonda,
Thanks for your comment.
If no work has been done to the property since it’s construction date, there may not be any depreciation available.
However, if you plan on doing any renovations, or the previous owner has completed some structural renovations to the property since 1987 then depreciation could be worthwhile.
Please get in touch with us on 1300 728 726 if you would like any further information.
Thanks,
The BMT Team