A Depreciation Schedule Can Improve Cash Flow

Monday 14 Sep 2020

When a building gets older and items within it wear out, they depreciate in value. The Australian Taxation Office (ATO) governs legislation that allows owners of any income producing property to claim a tax deduction for this wear and tear.

What Can Tax Depreciation Do For Investors?
Claiming tax depreciation allowances on an investment property increases its value by giving investors greater return on their investment.  Depreciation allowances combined with additional negative gearing factors such as interest on a mortgage, repairs and maintenance can help investors reduce their taxable income, pay less tax and improve cash flow.  The savings made can then be redirected to other areas, such as an investment mortgage or other debt reduction.  A Depreciation Schedule ensures maximum property tax deductions.

Investment properties are a great way to secure your financial future. As an Informed investor you’ll want to take advantage of all of the tax benefits that are available to residential property investors. Depreciation can be a huge tax deduction and many people that are less informed than you, forget to claim it. Who wants to pay more tax than they need to? To claim depreciation, you need a Depreciation Schedule.

What Is A Property Depreciation Schedule?
A property depreciation schedule (also called a depreciation report) sets out all tax depreciation and building write-off claims for a new or existing investment property.  A schedule will usually provides a 40-year schedule for capital works allowance (building write-off) and depreciable assets (plant and equipment allowance) on an investment property, ensuring owners receive the maximum tax entitlements.  Based on your allowances, the report calculates the amount you can deduct each year as part of your tax return.

What if you can't claim depreciation
Can’t claim the depreciation? Well, you can pay less Capital Gains Tax (CGT), instead. To counteract the sting of CGT, subtract the resale value of the plant and equipment from the time you bought it, to how much it’s valued by the time you sell it.

Purchase value – resale value = CGT offset

You get all this on your depreciation schedule

If you are thinking about claiming the most tax deductions out of your investment property, search for an experienced quantity surveyor are they well-versed in tax law. When you order a depreciation schedule, what you’ll get back will be in line with the new Federal Budget. Engagin  the services of a depreciation specialist guarantees you’ll receive an ATO compliant, comprehensive document that gives you access to maximum entitlements.