Depreciation Reports

What is Depreciation?

The Australian Taxation Office (ATO) allows an owner (or owners) to claim deductions for expenses incurred in earning rental income. Depreciation allows the owner/s to claim a deduction due to the wear and tear of a building structure (capital works deduction) and its fixtures (plant and equipment depreciation) over time. Depreciation is described as a 'non cash deduction', meaning the investor does not need to spend any money to be able to claim it.

An investment property does not need to be new to claim depreciation, however you can not claim depreciation for a property where construction commenced prior to the 15th September 1987. Additionally if you purchased a second hand residential investment property after 9th May 2017 you are unable to claim depreciation on existing second hand plant and equipment assets, removable and mechanical assets. (These are items such as air cons, blinds, hot water units, dishwashers etc). You can however claim for 'capital works' deductions - depreciation to the fixed structure of the property. (This is the actual building such as doors, roofs, basins, windows, retaining walls etc).

It is a common misunderstanding that an accountant can prepare a 'depreciation schedule'. The ATO specifically states that 'Accountants, Solicitors, Real Estate Agents and Valuers are NOT recognised to estimate construction costs for depreciation purposes (TR 97/25)

To ensure you are claiming all the associated expenses related to depreciation of your rental property we highly recommend that you obtain a Tax Depreciation Schedule. It can be the difference in thousands of dollars of deductions per annum.

What is a Tax Depreciation Schedule?

A Tax Depreciation Schedule is a professionally produced document highlighting items of plant, equipment and capital costs that may be depreciated (I.e. the construction of the house, fittings and fixtures, fencing etc). It incorporates the value of each depreciable item, including delivery costs, installation costs and the cost associated with bringing the plant into full operation.

Deductions are available for forty years. Additionally you can claim depreciation for renovations and any new plant or equipment.

If a property owner has not been claiming depreciation or maximising their deductions, the previous two years tax returns can also be adjusted and amended.

For more information on tax depreciation schedules, please visit; BMT & Assoc Quantity Surveyors www.bmtqs.com.au or contact 1300 728 726.