Depreciation & Investment Properties - FAQ's


Depreciation & Investment Properties - FAQ's

Q.....What is depreciation?

A.....According to the tax office, under income tax law, you are allowed to claim deductions for expenses incurred in earning assessable income, eg. rent. The cost associated with the acquisition of capital assets, which provide benefit over their "effective life" may be written off over a period of time as tax deductions and this is essentially know as depreciation

Q.....Can a Tax Depreciation Schedule increase my investment return?

A.....The answer in the majority of cases is yes. A Tax Depreciation Schedule can reduce an investor’s taxable income, and hence by claiming these deductions, investors can significantly enhance the after tax return from their investment and generate a healthier cashflow.


Q.....When is the best time to obtain a Tax Depreciation Schedule?

A.....The best time is usually as soon as possible after settlement. This allows all items of plant & equipment included in the original purchase price as distinct from any other items and/or expenses incurred during the remaining period of ownership.


Q.....Where do I get a Tax Depreciation Schedule from?

A.....The Australina Taxation Office (ATO) has determined that a Quantity Surveyor is a “qualified person” to estimate construction costs for the purposes of the Income Tax Assessment Act (1936) (TD 94/83, 13 October 1994. Para 2).


Q.....What is a Quantity Surveyor?

A.....A Quantity Surveyor is an independent professional consultant to the property and construction industries, offereing advice to investors, builders, developers, financiers and private clients.


Q.....How much does a Tax Depreciation Schedule cost?

A.....The cost associated with preparation of a Tax Depreciation Schedule varies from firm to firm. Generally, firms charge depending on the level of resources required to produce the reports, the degree of expertise in the area, location of the property and the depth of analysis required. Some firms are notorious for hefty fees and whilst the cost associated with the preparation of a Tax Depreciation Schedule are fully tax deductible, you should obtain several fee proposals prior to the engagement of a firm.


Q.....Besides cost, what other factors should I consider before engaging a Quantity Surveyor?

A.....Cost should not be the only factor considered when engaging a Quantity Surveyor. Other factors such as on-going service should also be considered. Your Quantity Surveyors fee should also include services such as answering all queries relating to the schedules from yourself, your accountant or the Australian Taxation Office (ATO). It should also include for minor updates to the reports over a period of not less than 10 years, pending that there are no “significant” changes to taxation laws or to the structural fabric of the depreciable property in question.

By David Maynard
CEO - My Tax Zone

Copyright 2014. My Tax Zone.