We get asked so many questions that we wrote a FREE eBook on depreciation. But here are some of the most common ones:
Simply ‘click’ on the relevant question below to view the answer.
If you have a question we didn’t answer here, or in our eBook, call us NOW on 1300 66 00 33 or email firstname.lastname@example.org
Why haven't I heard about a Tax Depreciation Schedule until now?
We are not sure of the exact reason for this very useful product being largely unknown, but we can certainly provide some educated observations to help.
- Accountants are primarily the first contact for the tax issues related to an investment property and the ATO deem them not to be ‘appropriately qualifed’ due to lack of extensive construction knowledge.
- Quantity Surveyors are highly qualified in construction, building and depreciation and are typically very busy. We doubt they get time to educate the investment community about a product they have known about for years.
- We have talked to many ‘experts’ in the property market including financiers, solicitors, conveyancers and valuers and most are not familiar with the product either. If they don’t know about it and they work full time in the industry… how could you be expected to know?
I thought a TDS only applied to new properties.
This is a very common misconception as most new properties being offered by developers will include a depreciation schedule. There is also a large amount of initial depreciation as the fixtures and fittings are all new. So if you own an older property, consider the stove. No matter what its age, it still has a value and an ‘effective life’, meaning it can decrease in value or depreciate from where it already is. This depreciating value applies just the same as if it were new, just at a lower initial value. Then consider that once you add all the fixtures and fittings in your property together [click here for an indicative list], you will receive a healthy grand total.
Can't I use the sample estimate that my developer gave me in my tax return?
The simple rule of thumb is NO. The sample estimate is just that… a sample. It is probably not specific to your property and may have items not included or contain the wrong measurements (eg larger area of carpet etc). The sample schedules are often just a marketing document to ‘illustrate’ what an investor might expect in depreciation if they were to obtain a FULL SCHEDULE. It is also rare that a sample will include all the rulings on low value pool, low cost pool and common areas which is quite simply not giving you the maximum returns available.
Why hasn't my accountant ever mentioned it before?
This is really common and we have discussed with numerous accountants to learn why this might be. We strongly believe that the main reason is TIME. It takes a great deal of time and specific construction knowledge to produce a depreciation schedule and till now, no-one has been offering the ‘user friendly’ link between the quantity surveyors industry and the accountants and their clients. It’s not that accountants don’t know about depreciation, rather they are not generally able to produce a full schedule without inspecting the property, looking up the various values for fittings, fixtures and construction costs, cross checking the tax act and then putting the whole lot into a spreadsheet. By the time they did that your schedule would cost thousands. Instead they do exactly as they should, and claim all the interest, repairs, financial shortfall and general associated costs.
My accountant said it's not worth getting done.
Your accountant could well be right. However, it is also likely they might not have the specialist knowledge on Depreciation that we do. How could they? They have to contend with a far larger component of the tax act than we do. And all we do ALL DAY-EVERY DAY is depreciation. We actually get a thrill out of finding the tricky little twists in the tax rulings so that we can pass it on. So before you dismiss getting a Tax Depreciation Schedule, call us NOW on 1300 66 00 33
and chat to one of our team about YOUR property or email us at email@example.com
. Chatting is FREE!
Is it worth depreciating a property more than a few years old?
Absolutely! You can refer to the above question about ‘not only new’ properties also. We should add that there a number of properties that have been renovated out there too. There is a great deal of depreciation in properties that have been remodelled, particularly older houses with bathroom and kitchen fitouts. All the new appliances, fittings, fixtures, consultant’s fees and labour costs are completely deductible. There are a number of dates that affect these rates as well which we can cover in a quick phone chat on 1300 66 00 33.
Is there anything to Depreciate on a property built before 1985?
Yes there is. EVERYTHING in an investment property has an effective life, therefore being able to be depreciated [click here for an indicative list] . The 1985 rule applies to another component of depreciation on the construction cost. If your investment property was built before 1985 you don’t qualify for the flat 2.5% depreciation for 40 years BUT there is often thousands of dollars worth of inclusions aside from construction.
Can I claim the renovations in my property if I didn't arrange them?
Yep. In fact this is one way to make sure you get the most out of a newly purchased property that is well presented and perhaps remodelled. Anything in the property that appears to be part of a renovation will be valued by our quantity surveyors and depreciated accordingly.
Even the stuff you can’t see like new wiring, new plumbing, water proofing etc that to the untrained eye would otherwise go unnoticed. You don’t need receipts either, we can value everything that makes up the property… no problem.
How does depreciation effect capital gains tax?
Claiming the FULL depreciation allowances on your investment property does not adversely affect your capital gains tax position. You are completely entitled to claim ALL deductions and CGT rulings remain the same. You will however be required to add your depreciation deductions to your capital gain when and if you decide to sell your investment. You must remember that the additional cashflow from your depreciation is likely to be far more useful up front than not having it at all. It can be utilised for additional repayments, adding value to your asset or as a buffer for vacancy. If you consider the indexing value, the dollars are actually worth far more to you now than years down the track.
Do I have to do anything special at tax time each year?
Once you have obtained your tax depreciation schedule, you simply take it to your accountant, both decide which depreciation method to use (we provide both methods) and it is lodged with your tax return. The schedule remains valid for this entire time and there is nothing further for you to do. Simple.