A Guide for Preparing a Tax Depreciation Schedule

Most commercial property investors desire to pay less tax to reduce operational costs while recovering debt as fast as possible. A depreciation schedule helps such investors to achieve cost-saving. However, many investors fail to take advantage of such provisions in Australian tax laws. Notably, a certified quantity surveyor must inspect a commercial property to document all depreciable items before preparing the report. This article is a guide for preparing a tax depreciation schedule.

What Is a Tax Depreciation Schedule?

A depreciation schedule is a report that specifies all tax depreciation deductions for a commercial investment property, new and old. The document estimates property deductions coupled with equipment and plant depreciation over the investment's lifetime. Therefore, a property owner can claim such depreciation in their tax return every financial year.

Capital Allowances and Plant and Equipment Items

Capital allowances refer to costs based on historical construction expenses of a commercial property. Such allowances do not comprise the value of equipment and plant assets. Capital allowances are claimed on properties built after the 15th September 1987, or on the maintenance of such structures. Plant and equipment items include loose assets in a building, such as carpets, curtains, HVAC systems, bathroom fixtures and fittings, and security systems. An investor can claim 20% to 100% of the residual value of plant and equipment items each year.

Hire a Qualified Tax Depreciation Quantity Surveyor

Australia has plenty of tax experts, such as solicitors, tax accountant, real estate agents, and valuers. Consequently, investors are not sure which expert is better placed to prepare a tax depreciation schedule. Well, the answer is none of the above. The Australian Taxation Office (ATO) implements the Tax Ruling 97/25, which requires a certified quantity surveyor to prepare the report. A quantity surveyor specialises in estimating the cost of a construction project. However, the expert must be a member of the Australian Institute of Quantity Surveyors (AIQS). Besides, the surveying firm that your preferred service provider belongs to must be a registered tax agent recognised by the Tax Practitioners Board (TPB).

Benefits of Using Tax Depreciation Schedule

A depreciation schedule helps commercial property investors to improve cash returns from their investments every year. From the construction period, a commercial property owner can claim depreciation for a maximum of forty years. For older properties, investors can claim a balance of forty years in depreciation. Therefore, you get thousands of dollars in cash returns every financial year for an investment's lifetime. You can also use your tax depreciation schedule to claim foregone income by adjusting previous tax returns.