There are two methods of depreciation to choose from: Prime Cost and Diminishing Value. Depreciation Schedules must contain both methods, but not all do. Your accountant will help you work out which method best suits you.
Effective Life Of Assets
Before we look at the two depreciation methods which the ATO allows it’s important we cover the concept of ‘effective life’ of an asset. The ATO sets the effective life of assets that are depreciable. This could be a Hot Water Heater, Air Conditioner, Carpet etc. If an asset has an effective life of 10 years then after 10 years it’s value reaches zero for the purposes of depreciation. The effective life of an asset is the same for both depreciation methods.
Prime Cost Depreciation Method
If you’re using the Prime Cost depreciation the value of assets will decrease by the same amount over the ‘effective life’ of the asset. E.g. An asset with an effective life of 10 years would depreciate at 10% per year for the 10 years.
Diminishing Value Depreciation Method
With the Diminishing Value method of depreciation the value of the assets decrease more rapidly in the first years than in the subsequent years. This tends to be the more commonly used depreciation method.
One thing to bear in mind is that when you start off using one method, you can’t swap to the other method. The treatment of Assets in the Low Value Pool also differs between the methods.
All Tax Depreciation Schedules from Depreciator include both the prime cost depreciation method and the diminishing value depreciation method.
To find out how much depreciation you may be able to claim on your investment property just give us a call on 1300 66 00 33. In a few minutes our friendly staff will provide a FREE estimate of your depreciation and a no-obligation quote to produce a Tax Depreciation Schedule for you.
Sometimes also called a Tax Depreciation Report or just a Depreciation Schedule, a Tax Depreciation Schedule is a document that shows your accountant the tax deduction they can claim for depreciation each year in your tax return.
Depreciation on your investment property is just compensation for wear and tear. Buildings wear out. So do stoves, carpet, etc – especially with tenants. So you get to depreciate them, or write them down, a bit every year. The amount of depreciation you can claim typically needs to be established by a Quantity Surveyor.
Without a Depreciation Schedule, your accountant will not know how much depreciation can be claimed on your property.
It is often the largest claimable tax deduction for rental properties.
Your Depreciation Schedule will show you how much depreciation can be claimed on the building itself year after year. It will also show you what can be claimed on eligible structural renovations.
And it will show the depreciation that can be claimed on brand new Assets, or fixtures and fittings.
Both methods of depreciation will be shown: Diminishing Value and Prime Cost – not everyone does that.
And the Low Value Pool will be there – some companies forget this, too.
Everything you need to claim depreciation every year will be in your Depreciation Schedule.
It depends. Don’t you hate that answer? How much a Tax Depreciation Schedule costs depends on the location, age of the property, and the amount of information you have on the property. Sometimes it may not be worth you paying somebody to inspect. We have a solution for those cases. In a quick phone call 1300 660033, the team at Depreciator can work out the best way to tackle your job and give you a price. You can also lodge an obligation free enquiry here.
Order your Tax Depreciation Schedule online or call us on 1300 660 033.
Many property investors needing a Tax Depreciation Schedule ask ‘Can’t my accountant just do it?’. Accountants don’t have the skills or construction qualifications needed to estimate what an investment property might have cost to build, or renovate. The people best qualified to do that and produce your Depreciation Schedule are Quantity Surveyors.
Even when clients have an investment property built and have construction costs, these are not normally broken down in a way that an accountant can use to work out your depreciation claim.
They send their clients to us because they know we keep on top of the Depreciation rule changes, and because they know that when they get one of our Depreciation Schedules it will have exactly what they need.
Get a no-obligation quote today from the firm trusted by hundreds of CPA and Chartered Accountants Australia wide. 1300 66 00 66
