A depreciation schedule removes the guess work when it comes to claiming depreciation on your investment property and can amount to enormous deductions you wouldn’t ordinarily claim.
You pay a once only fee of around $700, which is 100% tax deductible. In return, an accredited Quantity Surveyor will conduct an onsite full depreciation audit on your investment property, and then provide you with a schedule that can be used against your taxable income for up to 40 years.
This schedule becomes your accountant’s bible because it takes into account your actual investment property, and not the guestimate that most investors go by. The difference between a guestimate and an actual deprecation schedule processed by an accredited quantity surveyor can amount to enormous deductions you wouldn’t ordinarily claim. Meanwhile, the ATO will accept your Quantity Surveyor’s schedule without question.
In addition to making sure your schedule achieves the maximum deductions in rebates, you can choose to claim these deductions weekly, fortnightly or monthly, and through your pay packet instead of waiting until you submit your annual taxation return at the end of the year.
Did you know that due to the perceived hardship of negatively gearing, most investors sell within three years of purchase because of financial stress? By claiming your dedications weekly, you can reduce the amount of your financial stress, and be able to hold your property for many, many years, achieving natural capital growth due to time in the market.
Compare the figures below between using a depreciation schedule against not using one. This example is based on a new property with a 40-year depreciation schedule, 5% rental return and 5% interest rates.
New Property
Purchase price
$450,000
Rent $440 a week
$22,880
Expenses
$38,000
Pre-tax cash flow
($15,120) or ($291 a week)
With Depreciation
Pre-tax cash flow
($15,120) + Depreciation ($14,500) Total deduction ($29,620)
Post-tax cash flow tax rate 37%
Tax refund $10,959 & net cash outlay $4,161
Per week
($80)
Without Depreciation
Pre-tax cash flow
($15,120) or ($291) a week
Post-tax cash flow tax rate 37%
Tax refund $5,594 & net cash outlay $9,526
Per week
($183)
The difference between your cash flow with and without depreciation is $103 per week. As you can see, claiming depreciation will certainly help with your cash flow, it all adds up.