A Top 10 List - What You Need to Know About Depreciation Schedules

When it comes to property investments in Australia, understanding the nuances of depreciation schedules can make a world of difference to your cash flow and returns. At GPFG, we understand the intricate balance between investment and tax benefits, which is why we partner with Duo Tax, Australia’s most highly rated and reviewed team of quantity surveyors.

In a recent podcast, we sat down with George Nguyen from Duo Tax, who broke down the basics of tax deductions and depreciation schedules. Check it out here:

If you are unfamiliar with depreciation schedules, here is our Top Ten list of things every property investor should know about depreciation schedules.

1. What is a depreciation schedule?

A depreciation schedule is a comprehensive report that details the tax deductions a property investor can claim on the wear and tear of their property over time. This includes both the building itself and the assets within.

2. Two key elements: Capital Works and Plant & Equipment

Depreciation schedules in Australia are divided into two primary sections: Capital Works (structural components like walls and roofs) and Plant & Equipment (removable items like appliances). Different depreciation rates apply to each.

3. You can earn immediate tax benefits

One of the primary attractions of a depreciation schedule is the immediate tax relief it can offer. By understanding and claiming the right deductions, property investors can reduce their taxable income and enhance their yearly returns.

Read more on our blog: How Can Property Investors Maximise Their Tax Savings?

4. It's relevant for both new and old properties

While newer properties might see higher initial depreciation benefits, older properties can still offer substantial deductions. It's a myth that only new properties benefit from a depreciation schedule.

5. Professionally prepared schedules are essential

A DIY approach might seem tempting, but the complexities of tax law and the specifics of property depreciation mean that professionally prepared schedules are indispensable. Mistakes can be costly.

6. You should always use a quantity surveyor

Along the same lines of having professional prepared schedules, we recommend using qualified quantity surveyors. “We’re building economists. We specialise in providing independent advice on the costs of construction,” says George.

While accountants are well-versed in handling tax matters and can claim depreciation for their clients, they often lack the specific expertise and training to estimate construction costs and value depreciable assets. This is where quantity surveyors come in, bridging the gap between construction and taxation to provide accurate and maximised depreciation schedules for property investors.

7. It’s a long-term benefit

Depreciation schedules typically span 40 years, offering property investors long-term clarity on their yearly deductions. This aids in financial planning and ensures investors maximise their tax benefits across the lifetime of their investment.

8. Back-claiming is possible

If you haven't been claiming or have missed out on past deductions, fear not! In many cases, Australian tax laws allow property investors to back-claim missed deductions for up to two previous financial years.

“We can prepare depreciation schedules for as far back as you need,” George mentions in the podcast, “But we will recommend that you speak to your accountant to find out how much you can claim, and usually the ATO allows for up to two financial years.”

9. Schedules are cost-effective

The initial cost of obtaining a professionally prepared depreciation schedule is easily offset by the substantial tax benefits it provides. Moreover, the cost of procuring a schedule is 100% tax-deductible. At GPFG, we recommend our clients use Duo Tax to prepare their schedules. Their team of qualified quantity surveyors will leave no stone unturned, to help you maximise your deductions and savings.

10. You can get them for overseas investments too!

We get this question all the time with investors asking if the same tax benefits apply on overseas property investment. And yes! With a professionally prepared schedule by qualified quantity surveyors, you can claim deductions on your overseas property as well. For our clients who are buying in Bali or elsewhere, we are happy to help you with that process, so you can claim your benefits and tax savings.

Depreciation schedules are pivotal for property investors, unlocking numerous tax benefits and aiding in strategic financial planning, and ultimately growing your cash flow and long term wealth. Whether you’re a seasoned investor or just starting out, ensuring you have a comprehensive and accurate depreciation schedule is essential.

Reach out to the team at GPFG or Duo Tax today for any questions about how property depreciation can help bolster your investment returns.