What is a Tax Depreciation Schedule?

Simply,  a Tax Depreciation Schedule / Quantity Surveyors Report is in actual fact two different claims,

  1. the building which can be claimed as an allowance and
  2. the plant, which can be claimed as a depreciation expense.

It was introduced in 1985 and therefor properties built before that period don’t qualify and an allowance cannot be claimed, although any additions or refurbishments after that date can be claimed.

What it means for you is that just as you claim wear and tear on equipment or vehicles purchased to generate income, you can also claim the depreciation of your investment or rental property against your taxable income.

Claiming depreciation on your investment rental property is a perfectly legal way to reduce the tax burden of your income-producing investment in its current year.

A Tax Depreciation Schedule / Quantity Surveyors Report reduces an investor’s current year’s income on their property. The depreciation claimed is added back to the cost basis of the property when it is sold. Since the majority of Australian investors are looking for a long- term commitment when purchasing property, depreciation claims will maximise your property’s monthly cash flows and aid you to pay off your loan more quickly.

How much can I claim in deductions?

How much you can deduct through a tax depreciation report depends on four factors:

  1. Plant Assets, the value of the plant asset items bought with the property at settlement.
    (plant assets are items that do not form an integral part of the building’s structure).
  2. Building Allowance, the historical cost of the build. (what the building cost at the date it was built)
  3. Pre-Purchase Renovations or Extensions, the historical cost of any improvements to the original structure of the property made by the previous owners.
  4. Post-Purchase Expenditure is the cost of any expenditure by the current owner after settlement

It’s very important to note that you can claim substantial tax deductions on new, old, renovated, and shared properties, even those you have owned for many years and for which you have not claimed any depreciation. Remember a Tax depreciation Schedule / Quantity Surveyors Report covers the life of the property.