What is an investment property depeciation schedule and why is it useful to you as a property investor? A property depreciation schedule can save you hundreds, or even thousands of dollars each and every year. It is simple to get set up and will help you to maximise your investment cash flow for years to come.
One of the benefits of owning investment property in Australia is that, in many cases, you can use any losses from your property to offset the tax you are required to pay on your income. For example, if you were paying 30% tax on your income and your property lost $1,000 – then you could save yourself $300 in tax.
Now ideally, you don’t want to have to pay $1,000 just to get $300 back, and that is where the depreciation schedule comes in. You can depreciate parts of your investment property to create a loss on paper (due to decreased value in some items), you can then save that $300 tax without actually having to pay $1,000 out of your wage to achieve it.
Maximising your tax deductions is an important part of being a property investor and getting the maximum return on investment, and despite this fact many investors fail to get a depreciation schedule done on their property.
An invesment property depreciation schedule is a document created by a licensed Quantity Surveyor which details how much you can claim each year in ‘paper losses’ as a result of depreciation.
You can easily request for one by contacting a surveyor or a company who assesses property values. They will inspect your property and search for its building records. After that, you will be requested to submit some information:
- Purchase date of the property
- Year and date the property was built
- Date when the property became available for rent
- Construction expenses, if applicable
- Documents proving your authority to inspect the building files for property in question
The cost of the depreciation schedule will depend on the type, size, location of the property and other factors. The document may take two to three weeks to be processed, but it’s worth the wait.
Why Should I Get An Investment Property Depreciation Schedule?
Do you want to save on your taxes? If so, get a property depreciation schedule because it will help lower your taxes considerably. You can even get one to get a depreciation schedule done and create adjustments on your previous tax returns.
Two types of depreciation are available:
1. Depreciation on equipment – eg. blinds, carpets, heaters, etc.
2. Depreciation on building- eg. construction costs
The amount of depreciation you may claim depends on the status of the property – its age, fittings, use, size, and other factors.
Usually, the newer the property and its fittings are the larger the amount you can claim. This is because older properties and older fittings have already lost most of their value and thus there is not a lot left to claim. Newer items lose value quicker and thus lead to increase depreciation claims.
Getting a depreciation schedule is also a deductible expense and most companies offer a 100% money back guarantee, so you have nothing to lose.
You can complete a depreciation schedule yourself, but it is fraught with danger. There is a fine line between tax deductions and tax evasion and if you claim items that you cannot legally claim then you can get yourself into trouble. Using a qualified quantity surveyor means you can maximise your deductions (they have the knowledge to help you claim everything you are legally entitled to) but keeps you within the legal limits, thus minimising your risk.
So if you haven’t got a depreciation schedule done then jump on Google and search for “quantity surveyor [area]” or “depreciation schedule [area]”. They will need to go to the property to inspect it, so you will most likely want someone local.