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Tax Depreciation Schedule

A Tax Depreciation Schedule is an ATO-compliant report prepared by a qualified Quantity Surveyor that outlines all tax deductions available for the wear and tear of your investment property. It covers both Capital Works (Division 43) and Plant and Equipment (Division 40) deductions under the Income Tax Assessment Act 1997.

Any Australian taxpayer who owns an income-producing property can claim depreciation deductions. This includes individual investors, companies, trusts, self-managed super funds (SMSFs), and partnerships. The property must be used to produce assessable income, such as rental income.

Division 43 covers the building structure and fixed improvements. Residential properties built after 15 September 1987 can claim 2.5% per year for 40 years. Commercial properties built after 26 February 1992 also qualify. Earlier construction dates have different rates. Capital Works deductions are available for both new and second-hand properties.

From 1 July 2017, the ATO restricted Plant and Equipment (Division 40) deductions for second-hand residential properties. Investors can no longer claim depreciation on existing fixtures in previously used properties. However, you can still claim Division 40 deductions on brand new properties and any new items you purchase and install yourself.

The prime cost method provides equal deductions each year over an asset effective life. The diminishing value method front-loads deductions, giving higher claims in early years that reduce over time. Once you choose a method for an asset, you cannot change it. Your accountant can advise which method suits your tax situation.

Yes, the ATO requires depreciation schedules for properties where construction costs are unknown to be prepared by a qualified professional. Quantity Surveyors are specifically recognised under Tax Ruling TR 97/25 as appropriately qualified to estimate construction costs for depreciation purposes.

Yes, if you convert your principal place of residence to a rental property, you can claim depreciation from the date it becomes income-producing. However, for Division 40 items, you can only claim on items you purchased new. A depreciation schedule should be prepared based on the market value at the time of conversion.

You can amend your tax returns for the previous two financial years to claim missed depreciation deductions. For earlier years, you may be able to make a catch-up adjustment in the current year under certain circumstances. Consult your accountant about the best approach for your situation.

Yes, the cost of obtaining a Tax Depreciation Schedule is 100% tax deductible under Section 25-5 of the Income Tax Assessment Act 1997. The fee is claimed in the year you incur the expense, providing an immediate tax benefit in addition to ongoing depreciation deductions.

Any depreciation you have claimed on Plant and Equipment reduces the cost base of those items for CGT purposes. Capital Works deductions do not affect your CGT calculation. When you sell, you may need to include depreciation clawback for Division 40 items. Your accountant can calculate the net tax benefit considering both depreciation and CGT implications.

Yes, renovations and improvements are fully depreciable. Capital improvements depreciate at 2.5% per year under Division 43. New fixtures and fittings you install can be claimed under Division 40 at their full value, regardless of whether the property is new or second-hand. A new depreciation schedule should be prepared after significant renovations.

Most income-producing properties are eligible, including residential rentals, commercial buildings, industrial properties, retail shops, serviced apartments, and short-term rentals. The property must be used to earn assessable income. Owner-occupied properties and properties used for private purposes cannot claim depreciation.

Division 40 covers removable assets and fixtures such as carpets, blinds, curtains, air conditioning units, hot water systems, ovens, cooktops, dishwashers, light fittings, smoke alarms, garage door motors, and security systems. Each item has an effective life set by the ATO that determines the rate of depreciation.

A qualified Quantity Surveyor inspects your property to identify and measure all depreciable items. They calculate construction costs for Division 43 claims and assess the value of each Division 40 item. The schedule is then prepared as an ATO-compliant report covering the remaining effective life of each item.

Yes, you can obtain a depreciation schedule at any time during your ownership. The schedule will calculate deductions from the date the property was first used to produce income. You can also amend previous tax returns for up to two years to claim missed deductions.

Renovations and improvements you make to a rental property are fully depreciable regardless of the 2017 changes. A new or updated depreciation schedule can capture these items. If the renovations were completed in previous financial years, your accountant can amend past returns to claim the missed deductions.

Yes, properties held within an SMSF that generate rental income are eligible for depreciation deductions. The deductions reduce the taxable income of the fund, which is taxed at the concessional superannuation rate. A depreciation schedule prepared by a qualified Quantity Surveyor is required.

Depreciation deductions are split according to each owner percentage share in the property. For example, if two owners hold equal shares, each claims 50% of the total depreciation. The depreciation schedule can be prepared showing individual shares for each owner to provide directly to their accountant.

The ATO publishes effective life determinations for all depreciable assets. Common examples include carpets (8 years), hot water systems (10 years), air conditioning units (10 years), blinds (5 years), ovens (12 years), and smoke alarms (6 years). These effective lives determine the annual depreciation rate for each item.

Yes, commercial properties often have higher depreciation deductions than residential properties due to greater building costs and more extensive plant and equipment. Commercial buildings built after 26 February 1992 qualify for Division 43 deductions at 2.5% per year. Items such as lifts, HVAC systems, and commercial kitchen equipment provide substantial Division 40 deductions.