Tax Depreciation FAQs
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Depreciation is the wear and tear that occurs as things get older. As items get older, the value of these items also decrease in value. This is called depreciation. When it comes to your investment property, these items are classified as either Plant and Equipment or Capital Works. The wear and tear of either plant and equipment or building in an investment property is called tax depreciation. Depreciation that you as an investor can claim as tax deductions enabling also increased tax refunds. The ATO prescribes two methods – prime cost method or diminishing value method. Both that can be used to claim on your property depreciation.
As a team of property investors ourselves, we understand that every dollar counts. Having your own property is a dream that many Australians are working hard towards. Investors toil away for years to put away savings on a deposit for their first property purchase. Duo Tax Quantity Surveyors are Australia’s most reviewed and highly-rated Quantity Surveyors. As the country’s fastest-growing property tax depreciation service, thousands of investors have entrusted us to help them maximise their tax deductions each year.
First, you need to qualify the property; give us a call, and we will ask you a few simple questions to qualify your investment property.
Second, you order a schedule via our web form or over the phone, and we will begin preparing your depreciation schedule.
Thirdly, you can claim deductions, we will deliver your personalised depreciation report to you and your accountant within 5-10 business days.
It is a common misconception that existing properties do not yield any worthwhile depreciation. At Duo Tax, we are actively educating investors on the relevant laws and tax deductions available within investment properties and find that the above is not always the case. The ATO allows you to claim building depreciation (division 43 – capital works) on all residential investment properties built after September 1987.
If built before 1987, there still is a chance to claim depreciation if the property was renovated after 1992. The plant & equipment (division 40) is only claimable on older properties if you purchased the property before the 9th of May 2017 and rented it before the 1st of July 2017. You can use our calculator to receive a rough estimate of how much you can receive if you are able.
Yes, you can claim depreciation on your investment property even if you use it for short-term rentals. The same rules and regulations apply, and you can claim deductions for the period the property is available for rent. Our team can provide you with advice and guidance on how to maximise your deductions in this scenario.
You should update your depreciation schedule whenever you make significant changes or improvements to your investment property. This ensures that your schedule remains accurate and up-to-date and that you claim all the deductions you’re entitled to. We recommend reviewing your schedule every 3-5 years or after any major renovations.
Yes, you can claim depreciation on renovations and improvements to your investment property. If you’ve recently renovated your property, it’s important to update your depreciation schedule to ensure that you claim all the deductions you’re entitled to. Our team can assist you with this process and update your schedule.
The time it takes to prepare a depreciation schedule depends on the property’s complexity and the information availability. At Duo Tax Quantity Surveyors Parramatta, we pride ourselves on our quick turnaround times and efficient service.
We can usually deliver your depreciation schedule within days of conducting the site inspection.
Yes, you can claim depreciation on older investment properties. While the building allowance may be limited for properties constructed before 1987, you can still claim depreciation on the plant and equipment assets within the property. A quantity surveyor can assess your property and provide you with a detailed depreciation schedule, regardless of its age.
Ideally, you should engage a quantity surveyor to prepare your depreciation schedule as soon as possible after purchasing your investment property. This ensures you can start claiming deductions from the first year of ownership. However, getting a depreciation schedule is never too late, as you can still claim unclaimed deductions in future tax returns.
The cost of a depreciation schedule varies depending on the type and size of your investment property and the complexity of the assessment. At Duo Tax Quantity Surveyors in Parramatta , we offer competitive pricing and excellent value for money.
Contact us for a free quote tailored to your specific needs.
Quantity surveyors are recognised by the Australian Taxation Office (ATO) as qualified professionals who can assess the value of your investment property and prepare a compliant depreciation schedule.
We have the expertise and knowledge to ensure you claim all the deductions you’re entitled to, boosting your tax savings.
A tax depreciation schedule is a detailed report that outlines the depreciation deductions you can claim on your investment property. It includes a breakdown of the building allowance and plant and equipment depreciation, as well as the estimated deductions you can claim each year over the life of the property.
The salvage value, also known as residual or scrap value, is the estimated value of an asset at the end of its useful life. It represents the amount you expect to receive when selling or disposing of the asset after it’s fully depreciated.
When calculating depreciation, the salvage value is subtracted from the asset’s initial cost to determine the total amount that will be depreciated over the asset’s useful life. You must estimate the salvage value accurately, as it impacts the annual depreciation expense.
Calculating your annual rental depreciation involves determining the asset’s cost, its estimated useful life, and the method you’ll use (e.g., straight-line or declining balance). For investment properties, you’ll also need to consider the building’s age, the value of fixtures and fittings, and any renovations. It’s advisable to use tools like a Tax Depreciation Calculator or consult with a quantity surveyor to ensure accuracy and maximise tax benefits.
Yes, Duo Tax can prepare a tax depreciation schedule for your overseas international investment property provided it was built after 1990.
Fortunately not, our tax depreciation schedules will last the full 40 years of depreciation (where applicable). So, you only need to purchase one for each investment property you own. We make sure to capture all the depreciation available to you. If you have lost your schedule, email us, and we can send you another copy.
Quantity Surveyors are considered economists of the building sector. As accountants are unable to determine the cost of construction, it is then left up to the quantity surveyor to provide these estimates of cost. Naturally, then, they are in the best position and are trusted to provide reports. These reports are accepted by Quantity Surveyors, who are Registered Tax Agents with the Tax Practitioner’s Board.
The ATO prescribes two methods to calculate depreciation:
- The prime cost method: under the prime cost method, also known as the straight-line depreciation, you calculate the decrease in value of an asset over its effective life at a fixed rate each year.
- The diminishing value method: under the diminishing value method, also known as the declining balance depreciation method, you claim depreciation at a higher depreciation rate in the first few years of property ownership. As a result, the depreciation deduction value will decrease each year until the asset value runs out. Using low-value pooling, you can also increase the claim on items valued below $1,000. A Duo Tax Depreciation Schedule will automatically take all this into account for you.
If you are buying a first home and aim to reap the government incentives and benefits, don’t make the mistake of many thinking you aren’t entitled. If at any stage you decide to switch the asset from a home to an investment property, as soon as it is put on the market for rent, you are entitled to start claiming the deductions.
In these properties, unlike a house, if you purchase and own the space to run your own business, the ATO will allow you to claim the depreciation on these as a deduction. If you lease out a space and have completed a fit-out to operate your business, enquire with us to ensure you get the deductions. Speak to your accountant to get proper advice suitable for you.
If you are an overseas investor and looking at acquiring an investment property for the purpose of letting it out to tenants, by law, you must lodge an Australian tax return. As such, a depreciation schedule will work favourably for you. Speak to an accountant for clarification on your tax obligations.
We have created a simple tool for investors to use to determine if you can claim tax depreciation, including an estimate of how much you may be entitled to.
The capital works (division 43) renovations completed by previous owners are claimable if they were completed after the 27th of February 1992. As for plant & equipment (division 40), these items are only claimable if you purchased the property before the 9th of May 2017. If you purchased after this date, they are considered second-hand and are therefore no longer eligible to be claimed for depreciation.
The Federal Government legislated new laws for properties purchased after the 9th of May 2017 that ultimately affect depreciation claiming for second-hand plant & equipment (division 40).*
Brand new properties rented immediately are not affected. The plant & equipment in a property must now be brand new and never used before (and the property rented prior to the 30th of June 2017 if purchased second-hand) to be eligible to claim for depreciation. If the property is purchased second-hand after the 9th of May 2017, you cannot claim any of the existing depreciation in the property. However, any brand new items you install in the property for rental purposes will be claimable, provided the item was installed after moving out of the property.
The second scenario is where you purchased a brand new property; if you lived in the property for any amount of time before renting, the plant & equipment items inside are now considered second-hand and, therefore, no longer eligible to be claimed.
*Does not affect the company or managed funds.
Before you demolish and destroy any existing plant and equipment or structural elements of the property, such as an old kitchen and appliances, check with us to see if there is any residual value worth writing off as a loss. Most often, we find lots of deductions that can be claimed IMMEDIATELY that financial year.
Whether your property is in the heart of the city of Sydney or as interstate as the Great sandy desert, we can depreciate your property. We service Australia-wide with surveyors in every state. Call us on 1300 185 498 if you feel like it would be a problem for us to complete your report, and we will be happy to discuss details before proceeding with your purchase.
Division 40 is the category which covers assets that are easily removable from a building rather than attached or fixed. These include appliances and furnishings. Each item of plant or equipment within your property has an effective life measured in number of years. The effective life is determined by the tax commissioner under the latest Taxation Ruling. It is used to calculate the assets decline in value.
Division 43 is the category which addresses the building write-off component of your property. The historical construction costs include fees for preliminary items such as design fees, engineering and building approval costs. Where actual costs are not known, a quantity surveyor has estimated this amount by determining the appropriate costs for the building/structural improvement of the asset as at the date it was constructed. The percentage rate at which the building depreciates is dependent upon when construction commenced and the intended use of the building for i.e. commercial, manufacturing or residential purposes. This percentage will either be 2.5% or 4% and has been applied accordingly with respect to the information provided to us.
Yes, click below to order a tax depreciation schedule.
Scrap value, otherwise known as residual value or salvage value, is calculated differently and would require our team to provide you with a free estimated amount of how much depreciation you could potentially claim before your renovation or knockdown of the property.
Not all properties are purchased at the start or end of the financial year to make for an easy depreciation estimate. This means that your first-year estimates may be slightly different to a real tax depreciation schedule’s figures because you’ll only claim partial-year depreciation instead of for a full year.
This can be provided to you by your relevant local council.
You can also try searching your property address on Google as some real estate websites might have it listed too.
The depreciation calculator should be used more as an indication as opposed to a final accurate figure.
However, we’ve strived to make this property tax depreciation calculator as accurate as possible according to the available data we have, based on the thousands of properties we’ve inspected.
We find that many investors use this for research purposes to find out the first-year and second-year depreciation deductions and then contact us directly to get a more accurate estimate if they believe there are ample opportunities for tax depreciation claims.
Unfortunately, no, you can’t claim these figures as depreciation deductions.
According to the Australian Tax Office (ATO), your property must be surveyed and evaluated by a qualified quantity surveyor. While we try to keep the tax depreciation calculator as robust and comprehensive as possible, it does not replace a qualified quantity surveyor.
The term “plant and equipment” refers to the fixtures and fittings that are found within investment properties and are generally easily detachable from the property. The ATO recognises more than 6,000 different assets that investors can claim tax deductions on.
Here are some items that are considered plant and equipment fixtures:
| RESIDENTIAL | COMMERCIAL |
| Oven, stovetop and rangehood | Fire hydrant booster |
| Air-conditioning units | Billi hot water unit |
| Smoke alarms | Door closers for door struts |
| Downlights | Coffee machine |
| Electric garage door & remotes | Warehouse cranes & hoists |
The calculator will calculate the depreciation estimate based on a series of data points from our comprehensive database and compare this with similar properties to give you an approximate depreciation value for your investment property.
The ATO prescribes two methods to calculate depreciation.
1. The Prime Cost (straight line) Depreciation Method
Under the prime cost method, also known as the straight-line depreciation, you calculate the decrease in value of an asset over its effective life at a fixed rate each year.
2. The Diminishing Value Method
Under the diminishing value method, also known as the declining balance depreciation method, you claim depreciation at a higher depreciation rate in the first few years of ownership of the property. As a result, the depreciation deduction value will decrease each year until the asset value runs out. You can also increase the claim on items valued below $1,000 using low-value pooling.
The asset calculator uses both the diminishing value and prime cost method to give you an estimate of what you can claim on a depreciating asset, construction costs or capital allowance.
It’s important to understand that these are only estimates for your investment property’s capital works allowance and plant and equipment assets. So, the final claimable depreciation amount is subject to change.
The Rental Property Depreciation Calculator is designed to provide investors with first-year and second-year estimates of how much they can likely claim depreciation deductions on their residential or commercial investment property. This will give you a good gauge of whether purchasing a tax depreciation schedule is worthwhile.
Alternatively, you can contact us to get a free estimate of your depreciation amount and quote for your depreciation schedule.
