Depreciation for renovation made easy!
Investment property owners often miss out on thousands of dollars due to two main reasons:
- They don’t know what depreciation entitlements they can claim for renovations or refurbishments to their investment property
- They don’t use a qualified Quantity Surveyor to prepare a tax depreciation schedule
Follow the steps below to ensure your tax depreciation schedule is right the first time around.
Understand scrapping
Scrapping refers to the removal and disposal of any potentially depreciable asset from an investment property. When worn or old assets (like carpet and hot water systems) are replaced and scrapped, the owner of the property may be entitled to claim the remaining depreciable value for the items being removed as a tax deduction in that financial year.
Get a “before renovation” tax depreciation schedule
Arranging a tax depreciation schedule before completing renovations will save you time and money when making a claim. In case of an audit by the Australian Taxation Office (ATO), a valuation of all items in a property, as well as adequate photographic records is required.
Get an “after renovation” tax depreciation schedule
A second schedule is prepared after completion of the renovation, identifying the value of all new plant and equipment and capital expenditure within the property. The adjustments will be made to your tax depreciation schedule for a small adjustment fee and should not cost you as much as the initial tax depreciation schedule. The new schedule will outline all the depreciation claims available for the life of the property (forty years).
Only deal with a credible provider of tax depreciation schedules
Investment property owners should contact a depreciation specialist who will visit the property and carry out a detailed survey including identifying, measuring and costing the building, fixtures and fittings. They will then provide a tax depreciation schedule outlining all the deductions available for the life of the property.
Scrapping is a complicated process that requires the expertise of a specialist Quantity Surveyor in conjunction with an Accountant. By requesting a tax depreciation schedule you know you’re not going to miss out on anything and your Accountant will love you for it.
