Tax Depreciation Schedule: All There Is to Know About It

Finance & Money Blog

Are you a property investor? Whether it's a commercial or residential property, calculating the correct tax deduction is crucial to maximising your after-tax returns on the property investments. Most investment properties are depreciable, which means you can benefit from the related tax depreciation deductions that reduce your taxable income. Besides improving your returns on investment on your property, property depreciation can also help improve your cash flow. When thinking of tax depreciation and deductions on your property investments, it's imperative to understand tax depreciation schedules. Here is all you need to know.

What It Is

A tax depreciation schedule is a document or report that outlines all the depreciable assets associated with your investment property, which could include the property itself. That is, it lists all available tax deductions for the property. This information is crucial because it allows you to understand the amount of tax to claim when submitting your tax returns, ensuring you claim the correct tax back amount. The good thing about tax depreciation schedules is that they apply to both old and new property, so you don't have to worry if your property isn't brand new.

It's usually best to engage a professional to help you prepare the schedule. Accountants, tax depreciation companies and quantity surveyors will come in handy here.

What It Entails

A tax depreciation schedule typically entails two major depreciation components: plant and equipment and capital works. Depreciation on plant and equipment includes all fittings and fixtures in your investment property. It's worth noting that this entails all items, including those purchased by the previous property owners. Some of the fittings covered under plant and equipment depreciation include air conditioning units, carpets, lighting fixtures, furniture, security systems and appliances such as refrigerators.

On the other hand, depreciation on capital works covers all the building-related aspects like constructions and renovations or improvements. Therefore, whether you are making bathroom or kitchen makeovers, extending your garage or patio, etc., these will fall under capital works in your tax depreciation schedule.

When to Consider One

The ideal time to purchase or order a tax depreciation schedule is usually before the financial year ends. Doing this enables you to optimise your annual tax deductions when submitting your tax returns.

The Benefits

Tax depreciation schedules will help you claim back any missed cash from your previous tax returns. What's more, it's generally a one-off cost, and the schedule will last a lifetime. Worth noting is that the one-off cost is also entirely tax-deductible.

Reach out to a professional for your tax depreciation report.


11 May 2021

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