When you own an investment property, the building and many items in it lose value over time. The tax rules let eligible investors claim that decline in value as a deduction. A depreciation schedule is the report that works out how much.
What a depreciation schedule is
A depreciation schedule is prepared by a qualified quantity surveyor. It lists the building and its fixtures and fittings, such as the oven, hot water system, carpets and blinds, and estimates what can be claimed each year. Your accountant uses it when preparing your tax return.
The building
- Walls, roof, slab
- Built-in structure
- Claimed over many years
Fixtures and fittings
- Oven and cooktop
- Hot water system
- Carpets and blinds
Why it is often larger for a new property
A brand-new property starts its life with you, so the building and its fittings have their full value to depreciate. The rules for claiming fittings in established homes bought second-hand are more limited for many investors. That is one reason investors often look closely at new builds.
It is a deduction you don't pay cash for
Most investment costs, such as interest, rates and repairs, are cash you spend. Depreciation is different. It is a deduction for wear and tear, so it can reduce your taxable income without a matching cash payment. How much it is worth to you depends on your income and tax bracket.
You may not have to wait until tax time
Some investors apply to the ATO to vary the tax withheld from their pay, so the benefit of their property deductions arrives through the year rather than as one refund. Your accountant can tell you whether this suits you.
When to get one
- 1HandoverThe property is complete
- 2Order the scheduleFrom a quantity surveyor
- 3First tax returnYour accountant uses it
- 4Years aheadOne report covers many years
Order a schedule once the property is complete, ideally before your first tax return for it. It is a one-off report that usually covers many years, and its fee is generally tax deductible.
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Buy and holdCommon questions
Who prepares a depreciation schedule?
A qualified quantity surveyor.
Can I claim depreciation on an older property?
Often yes for the building itself if it was built after certain dates, but rules for fittings differ. Your accountant can confirm.
Is depreciation a reason to buy a property?
It is one factor among many. Location, price, rent and your own goals matter more.
General information only. Not tax advice. Maple Investment Group is not an accountant; speak with your accountant about your circumstances.
