Why should I get a depreciation schedule?

If you have or are thinking of buying an investment property, a depreciation schedule is something that you could find well worth having. These are prepared by Quantity Surveyors and quantify the costs associated with your property, like construction costs as well as contents.

The main reason that obtaining a depreciation schedule is important is that in addition to normal running deductions, (i.e. water, repairs, mortgage, etc.…), you can also claim depreciation as long as you have the depreciation schedule. This can be an added deduction that you could have potentially missed out on without one. Generally the deductions that are available tend to be the highest within the first seven years, particularly in a new property. It is an ATO requirement that claiming of these deductions be substantiated by a depreciation schedule compiled by a qualified person.

There are two types of allowances of depreciation. The first type is depreciation on plant and equipment. This type of depreciation includes things such as stoves, hot water systems and microwaves. These are items that are in the home when you purchase it. Of course items that you buy subsequently can be depreciated separately as well. The second type of allowance is the capital works allowance and is based on the cost of construction of the dwelling. The plant and equipment on hand at purchase and the construction cost cannot be claimed without a depreciation schedule, so by getting one you are giving yourself an opportunity to capitalise on all the deductions that an investment property can offer.

Another benefit of a depreciation schedule is due to the fact that if you have a negatively geared investment property, this will enable you to recover some of the short fall through tax refunds and consequently can result in making the property more affordable. Now while it is seemingly attractive to have more deductions should you have an investment property, it is not recommended that you invest in a property with the pure motive to save on tax. Tax savings should help finance a property and should not be used as a way to lower your tax payments.
The main consideration in your decision to invest in a property should be based on whether it is a sound investment, with the tax benefits being a bonus.