How A Depreciation Schedule Helps Investment Property Owners
Among the available tax deductions for property investors, property depreciation is one of the most underappreciated. Not many know the huge savings they can get from annually filing their depreciation schedules with the help of a Quantity Surveyor.
What is Property Depreciation Deduction?
Property depreciation is a tax deduction designed to offset the declining value of investment properties. Investors can claim tax deductions on building structure, equipment, and permanently installed items that are considered part of the property.
For residential properties built after July 1985, building allowance and plant and equipment deductions can be claimed. However, for properties built before this date, only plant and equipment allowances can be claimed.
Take note of the different cut-off dates for varying property categories. Non-residential, residential, traveller accommodation, and manufacturing properties each differ in eligible tax deductions, depending on their construction commencement dates.
The Australian Institute of Quantity Surveyors (AIQS) Code of Practice requires site inspections as part of ATO requirements. Qualified Quantity Surveyors will check all depreciable items by documenting photos of them. These photos can be used as evidence in case an audit is conducted. The best time to have Quantity Surveyors inspect the property is just before the tenant moves in.
What is a Depreciation Schedule?
The document that contains the information regarding your property depreciation claims is called a tax depreciation schedule. It contains the details on the items in the property that lose value every tax year.
A tax depreciation schedule is usually prepared by a Quantity Surveyor.
The Importance of a Depreciation Schedule
What makes property depreciation different is how you don’t need to spend anything on your property to file for deductions. Aside from this, here are the other reasons why you shouldn’t forget to file your depreciation schedule every year:
1) It reduces your taxable income
Property depreciations are subtracted from your taxable income, allowing you to pay lower taxes every year.
Wear-and-tear is a natural phenomenon that lowers the value of income-earning properties. By being able to deduct the losses on your taxable income, you’ll get to enjoy a larger portion of your hard-earned money.
The savings you can get from the tax deductions can make a big impact on your cash flow.
2) It’s the only way to claim tax deductions for property depreciation
You can’t claim deductions on your income-generating property any other way but through a depreciation schedule confirmed by a qualified Quantity Surveyor.
3) The value of renovations can be estimated
When claiming for property depreciation, it’s your duty to indicate the cost of renovations in case you’ve done any for the tax year. You can’t file for deductions if you don’t know the value of the item you’re claiming for depreciation.
In case you don’t know the value of the renovation, probably because they were done by the previous owner, it’s still possible to claim deductions. A qualified Quantity Surveyor can estimate the cost of the renovations needed in filing your depreciation schedule.
4) Huge savings with nothing to lose
The cost of preparing your tax depreciation schedule depends on the type, size, and location of your property. You must pay the Quantity Surveyor for assessing all items that can be included in your depreciation schedule.
But many of the top Surveyors either offer a money-back guarantee or a free report per year. Additionally, the fees of Surveyors are 100% tax-deductible, so you basically have nothing to lose to hire one for filing property deductions.
If you own an investment property, don’t forget to file your depreciation schedule to enjoy tax savings on items that lose value as time passes. It’s not that hard to file for tax deductions, especially when you have an eligible Quantity Surveyor at your side. Combining property depreciation with other tax saving schemes can have a positive impact on your cash flow.