Investment Property Depreciation Schedule and Tax preparation

/Investment Property Depreciation Schedule and Tax preparation
Investment Property Depreciation Schedule and Tax preparation2019-01-21T07:22:49+10:00

You have purchased an investment property and now you need to prepare your tax…

What will you need to provide your accountant when preparing your tax?

Settlement Statement / Sheet

You will have received from your solicitor or conveyancer a settlement statement or settlement sheet detailing your purchase. This gives your accountant information such as the purchase date of your investment property, cost and miscellaneous charges.

Loan Statements – From Date of Purchase to 30 June

Interest can be claimed. In addition to other fees / charges, such as establishment fees, mortgage insurance, monthly fees, and annual package fees. It is therefore important that you take these loan statements with you to your accountant.

Depreciation Schedule

If your property was built after July 1985, it would be advisable to obtain a depreciation schedule from a reputable and qualified Quantity Surveyor. This will enable your accountant to maximise your claim. Depreciation is often the second largest deduction on a rental property, after interest. The fees for obtaining a Quantity Surveyor report is tax deductible, and the report generally only needs to be done once over the life of the property. We can refer you to several reputable firms for this service.

Monthly / Annual Rental Statement

It is a good idea to obtain an Annual Statement from your Real Estate Agent / Property Managers. If there is a cost for this, it is usually nominal and it is tax deductible. This Annual Statement will include things like:

  • General expenses
  • Council rates
  • Water rates
  • Stationery and postage
  • General expenses
  • Phone calls
  • Pest control
  • Gardening / Lawn mowing
  • Body corporate and strata fees
Repairs and Maintenance

The cost of repairing damage to your property is a tax deduction, and you should advise of any repairs you have undertaken with your rental property.

If there were improvements done to the property (e.g. new kitchen/bathroom), please also advise us of these, as they can be depreciated.

Please note: If you did any repairs, alterations or improvements to the property after purchase but prior to the property being tenanted, this is generally not deductible. Please speak with your accountant prior to doing the repairs, alterations or improvements or attempting to claim them.

Land Tax

You may be liable for Land Tax if the land value of your NSW investment property is more than $412,000 (in 2014). Please note that Land Tax is treated differently in each State. Please speak with your accountant or your solicitor for more information regarding this.

Depreciation Schedules for Investment Properties

Depreciation Schedule

If your property was built after July 1985, or you did extensive renovations after that date, it would be advisable to obtain a depreciation schedule from a reputable and qualified Quantity Surveyor. This will enable us to maximise your claim. Depreciation is often the second largest deduction on a rental property, after interest.

The fee for obtaining a Quantity Surveyor report is tax deductible, and the report generally only needs to be done once over the life of the investment property. We can assist and refer you to several reputable firms for this service.

What is a depreciation schedule?

As a building gets older and items within it wear out, they lose their value. This is called depreciation. The ATO allows property investors to claim this depreciation which is based on the cost of the building and the cost of the plant and equipment items within it.
This can be claimed by any owner of an income producing property. This deduction essentially reduces the investment property owner’s taxable income – they pay less tax!

A Quantity Surveyor attends the property and prepares a schedule listing after inspecting, measuring, reviewing relevant documents and even taking photos of the property and the assets.

The report will show the total estimated construction costs of the property and detailed costs of all assets that can be depreciated. It shows the depreciation amounts for every item in a list which is spread over the years.

Who do we recommend?

These are several Quantity Surveyors however we recommend the following as we believe they prepare the most accurate and detailed reports.

How much is the report?

The cost of a depreciation report can vary depending on the Quantity Surveyor you choose and the investment property involved. They start from about $600. This cost is 100% tax deductible in the year the expense is incurred and you should get your report within a week or so after the inspection.

How often does it need to be done?

A depreciation schedule can last up to 40 years as that is the maximum claim that can be given on the construction costs of the building. Depending on when the property was built and if any further renovations/improvements were done will be factors in determining the life of the report. But one report should be enough in most, if not all cases.

Are there other benefits?

The report gives you a complete list of all the assets held and this can be used when later selling the property or if needed for insurance purposes when identifying assets e.g. if you have a new for old policy. Also, the report will stand up to any test of scrutiny by the ATO if an audit was to ever arise.

This information has been provided by Absolute Accounting Services.

Disclaimer: This information is a guide only. We and Absolute Accounting Services disclaim any and all liability to any person whether a purchaser or not. Fr the consequences of anything done or omitted to be done by any such person relying on a part or the whole of the contents here. Do not act on the information without first obtaining specific advice regarding your particular circumstances from a tax professional. 

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