Before tax time, it is worth checking whether your investment property depreciation schedule still reflects the current condition and value of your property.
A residential tax depreciation schedule helps your accountant claim valuable tax deductions for your income-producing property. These potential tax deductions may include capital works deductions and plant and equipment depreciation. They may apply to the building structure, fixed assets and separate depreciating assets.
Depreciation is a non-cash deduction that can reduce your taxable income without impacting your cash flow. Your rental property depreciation schedule can become outdated due to renovations, asset replacements, additions or removals.
A review before lodging can help you maximise potential tax savings and claim maximum deductions. It also gives your accountant clearer depreciation calculations based on the asset’s effective life and depreciation rate.
For many residential investment property owners, this is a simple way to maximise deductions and claim tax depreciation allowances for taxable assets before tax time.
What Is a Tax Depreciation Schedule?
A tax depreciation schedule is a detailed report that outlines the tax deductions you can claim for a residential investment property.
It helps your accountant find allowable tax benefits as your investment property ages. These may relate to the building, structural elements and separate depreciating assets.
A qualified quantity surveyor prepares the depreciation schedule. They assess the property and estimate construction costs when needed. They also sort claims under the Australian Taxation Office tax legislation.
The two main categories are:
- Capital works deductions: These apply to buildings and fixed assets. This can include walls, floors, roofs and built-in cupboards. These relate to Division 43 and the prime cost method.
- Plant and equipment depreciation: These cover removable depreciating assets. This can include appliances, blinds, carpets and air conditioning units. These relate to Division 40 and may use the diminishing value method.
This report helps property owners claim maximum tax depreciation deductions. It also supports their investment property report for tax purposes.
Do You Need a New Depreciation Schedule Every Year?
Generally, you do not need a new depreciation schedule every year.
One tax depreciation schedule can last up to 40 years. It gives a year-by-year guide to allowable deductions based on the asset’s remaining value.
However, it remains accurate only if it accurately reflects current asset values and property conditions.
Substantial renovations, asset changes or rental use alterations may require an update.
Think of it as a tax time check-up. You may not need a new schedule every year. But you should still review it before lodging.
When Should You Update Your Tax Depreciation Schedule Before Tax Time?
Update your depreciation schedule if the property has changed since the last report.
Even minor changes can affect your claim. New depreciable assets may increase deductions. Removed or replaced items also need to be recorded.
This is vital for renovation claims and asset changes during the year.
Review your schedule if you have:
- Renovated kitchens, bathrooms or laundries
- Replaced carpets, blinds, curtains or flooring
- Installed new appliances, air conditioning or hot water systems
- Added storage, lighting, fencing or outdoor structures
- Removed assets during renovations
- Built extensions, granny flats, decks or pergolas
- Changed the property from private use to rental use
- Switched from long-term rent to short-term stays
- Bought an older property without a previous property tax depreciation schedule
- Found your old report no longer matches the property
If assets were removed, a qualified quantity surveyor can assess if scrapping deductions apply. These may apply to items removed before the end of their effective life.
Reviewing before tax time helps your accountant use current figures. It may also help maximise valuable deductions. Prioritising your depreciation schedule before tax time gives you an advantage in preparation and planning with your accountant.
Why Updating Before Tax Time Can Help Your Accountant
Your accountant claims tax depreciation deductions based on the records they have.
An outdated report may miss recent renovations, new assets or removed items. This can reduce tax return accuracy and valuable tax benefits.
An updated, ATO-compliant depreciation schedule gives clear figures. It shows changes and lists claims for the year.
It also helps your accountant separate Division 43 capital works and Division 40 plant and equipment claims.
This is important when assets are replaced or upgrades are finished before renting again.
Reviewing before tax time can streamline the process. It can lead to better records and fewer queries.
It also supports maximising tax return deductions for rental property income.
What If You Missed Depreciation Deductions in Previous Years?
Many residential property investors discover depreciation benefits after years of owning a rental property.
Others assume their registered tax agents have handled it. Later, they may find that no schedule was prepared.
If you have never had a depreciation schedule, you may still claim from this tax year onwards.
Your accountant or registered tax agent can advise on back claiming depreciation. This may involve amending previous tax returns within the amendment period.
Tax time is a good moment to explore this.
Is a Depreciation Schedule Worth Updating for an Older Property?
Yes, older properties often may have depreciation claims. This is especially true if they have been renovated, extended or improved.
Upgrades can affect claims. This includes kitchens, bathrooms, flooring, air conditioning, fencing or fittings.
Even older buildings may qualify for Division 43 capital works deductions if valid works were done within the claim period.
Newer Division 40 depreciating assets may also need to be added.
Checking older properties before tax time can help capture missed depreciation allowances. This may include improvements made by previous owners.
What Documents Should You Prepare Before Requesting an Update?
Gather records that show property changes. This can speed up the update and improve accuracy.
Useful documents include:
- Original tax depreciation schedule
- Purchase contract or settlement statement
- Renovation and builder invoices
- Receipts for new appliances, fittings or fixtures
- Records of removed, replaced or scrapped assets
- Floor plans, if available
- Dates when the property was ready for rent or income-producing purposes
- Photos of recent works or upgrades
These can help confirm if scrapping deductions apply after replacements.
If some records are missing, a qualified quantity surveyor can advise what is needed. They can also work with the information you have.
Preparing ahead saves time for everyone.
How Early Should You Organise a Depreciation Schedule Before EOFY?
Review your schedule before the end of the financial year.
Do not wait until your tax return is due. An early review helps prepare for EOFY property tax claims with fewer delays.
Quantity surveyors need time to assess the property. They also need time to assess construction costs and update the report.
Accountants need time to verify figures before lodging.
Starting early helps resolve missing records or confirm asset changes.
Ordering or updating an ATO-compliant report before tax time gives you a clearer view of your claims. It also supports your accountant.
FAQs About Updating a Depreciation Schedule Before Tax Time
Do I need to update my depreciation schedule every year?
No. Usually, you only need to review it before tax time if renovations, asset changes or rental use alterations occurred.
Should I update my depreciation schedule after a renovation?
Yes. Renovations affect claims. New assets, works and removed items may need to be recorded. Some removed items may qualify for scrapping deductions.
Can I claim depreciation if I never had a schedule before?
You may claim from this tax year onwards. Your accountant can advise if past returns can be amended to back claim depreciation.
Is it too late to get a depreciation schedule before tax time?
Not always. It depends on your tax return deadline, available details and report preparation time. It is best to start early.
Can an older property still have depreciation deductions?
Yes. Older properties often have claims, especially if they include renovations, extensions or newer assets within the claim period.
Can my accountant prepare a depreciation schedule?
Accountants prepare tax returns, but a qualified quantity surveyor usually prepares the depreciation schedule. This helps ensure accurate asset values and correct Division 43 and Division 40 claims.
Review Before You Lodge
A tax depreciation report does not require yearly replacement, but it should be reviewed before tax time.
Property changes can affect claims.
Reviewing before lodging gives you time to update the report and organise records.
Current ATO-compliant reports can simplify tax time. It gives your accountant accurate figures and helps avoid leaving valuable deductions unclaimed.
To check if your property tax depreciation schedule needs updating before tax time, call 1300 185 498 or contact our team today.
