It’s something we get asked all the time by clients pondering a purchase and there are two main reasons for it: the first is that new properties cost more to build; and the second that the Assets in them can be depreciated.

And the best time to do a Depreciation Schedule on a new property? As soon after completion as possible – while everything is fresh in people’s minds. Perhaps you have a client with a brand new property? You can refer them using your booking link. 

The next most common question around new houses from clients and increasingly accountants is whether we need to inspect the property to put together a Depreciation Schedule.

This is also the time when your clients are grappling with that perennial ‘repairs vs improvements’ dilemma. We have those conversations with them so you don’t have to. And we update their Depreciation Schedules free of charge – forever.

When you refer a client for a new Depreciation Schedule, we’ll keep you in the loop throughout the process. 

Key Points

1. 1. New properties have more depreciation to claim not only because they cost more to build, but also because clients can claim depreciation on the Assets (inclusions) where their tenants are the first people to live in the property.
2. 2. Not all properties need inspection. Where the build cost is known, we can use your client’s actual costs to prepare the Depreciation Schedule. 
3. 3. Repairs vs improvements continues to be a hot topic with clients. We give clients our opinion and get them to run it past their accountants for advice. It’s all part of Depreciator’s service.
4. 4. When you refer a client to us, we’ll keep you in the loop to ensure your client has their Depreciation Schedule ready to go come tax time.

Why do new investment properties have more depreciation than older properties?

The most obvious reason new properties have more depreciation is that they cost more to build. And the build cost is what largely drives depreciation.

Over the last few years, there have been huge increases in costs – and depreciation – in all markets. We keep tabs on build costs across Australia and are amazed at what has happened in some markets.

And it’s not builders being greedy. Everything just costs more these days – and there is no end in sight to that.

One of the few things that has not increased in price are our Depreciation Schedules – it’s been well over 20 years now and the price for inspection jobs has not budged.

The other reason new properties have more depreciation is that the Assets (inclusions) in them can be depreciated. There are still people who ask about about the ‘changes to depreciation’, despite those changes having happened in 2017 – nine years ago. They are not news anymore – we get a bit nostalgic thinking about that federal budget in May 2017.

Of course, we still include the opening WDV of Assets in the Schedule, but do not factor the ‘deferred depreciation’ into our annual tallies. Some accountants find these figures useful for CGT calculations down the track.

And of course those changes did not mean that there was no depreciation left in existing properties. We have written about that most recently here.

Do we need to inspect properties to create Depreciation Schedules?

Clients and increasingly accountants are asking us whether we need to inspect a property to put together a Depreciation Schedule.

In the case of a new house, it’s unlikely. But we are always happy to inspect a property if requested.

If the construction cost of a property is known, it must be used as a starting point. That’s in the legislation. Then it comes down to valuing the Assets.

In some contracts, there is a dollar value beside the Assets. Occasionally, clients have taken over the completion of a house themselves and know lots of costs. These are the cases where an inspection is not needed.

Then there are the ones where a client has paid for a house to be built and all they have a vague quotation and no plans – that always amazes us. Or the contract has few specifics on inclusions and the client lives interstate. Often it’s best to inspect these ones.

We’ll always chat to your client and work out the most sensible way to proceed. And if we don’t need to inspect, we can turn these around in a few days – even quicker if you need us to. We have written before here about our legendary speedy turnaround. Even on jobs where we need to inspect, nobody is quicker than us. We’ve been doing this for nearly 25 years, so we have some good systems.

Repairs vs improvements – how we help your clients.

Thankfully, repairs are not something people need to worry about when it comes to new properties, but existing properties can be a bit of a money pit – hence the fondness for ‘new’ by many investors.

We get called by clients all the time asking our opinion on how the money they have spent on their property should be treated. They call us because they know we have more time to chat about this stuff – and because we don’t charge them. You would know about our free lifetime updates?

We don’t advise clients, but simply give our opinion and suggest they run it past you. (It’s comforting that accountants always agree with the line we take). 

When it comes to working out whether work can be expensed or needs to be depreciated, we need to know the nature of the work and whether the problem arose while the client was renting out the property.

We had a client this week who knew all about ‘initial repairs’. He understood that work done to improve a property after purchase could not be expensed, so he has a cunning plan. He let the existing tenant stay in the property for several months after settlement. When they left, he did a full internal repaint, fixed some ceiling issues in a bedroom, replaced a benchtop in the kitchen and repaired some windows.

He was disappointed when we told him that we were sure his accountant would want all that work depreciated. He was doubly disappointed when we said it would all be classed as Capital Works  i.e. 2.5%. He said he would call us next time before he does anything.

When you  refer a client to us, we’ll keep you in the loop along the way. 

When you refer a client to us, it’s natural to assume everything is progressing smoothly—and in most cases, it is.

You’ll receive an email confirmation as soon as we’ve received your referral, so you know the process is underway. From there, we aim to contact your client within the hour, and often they’re expecting our call. Some clients take the opportunity to better understand how depreciation works, which we’re always happy to walk them through.

We’ll then gather key details about the property, review any available information online, and provide an estimate of the available depreciation along with our fee.

At this point, everything is typically on track—but occasionally, the client may go quiet.

Rest assured, we’ll continue following up. However, if we’re unable to reconnect, we may reach out and suggest a quick nudge from you. A timely prompt can make all the difference in ensuring your client has their Depreciation Schedule ready when it’s needed—rather than arriving at tax time without it.

Enquire now for a property-specific assessment

Has this article reminded you about a client’s investment property? Residential properties, commercial properties, even farms, we do them all.

If you want us to talk to a client about a Depreciation Schedule, make a no-obligation enquiry and rely on our 20-plus years of experience in estimating depreciation returns.