Components of Depreciation Schedule

An important thing to understand about depreciation schedule Melbourne is that the amount you write off is not dependent on how much money you put down to purchase the property. It is important to know that depreciation is not a choice and if you are eligible to take it, you must take the tax write off. If your rental is eligible for depreciation but you choose not to take it or forget to take it.

Depreciation schedule has two components:

• Capital works deductions
• Plant and Equipment depreciation

Capital works deductions

Capital works deductions are income tax deductions that can be claimed for expenses such as:

• building construction costs
• the cost of altering a building
• the cost of capital improvements to the surrounding property such as, external improvements (fence, driveways, retaining walls and others).

Capital works costs are deducted over 40 years.

Plant and Equipment depreciation

Plant and Equipment items for residential and commercial properties are items that can be easily removed including (but not limited to) carpets, hot water systems and air-conditioners, as opposed to items that are permanently fixed to the structure of the building. Plant items include mechanically or electronically operated assets, even though they may be fixed to the structure of the building. These items are affected by the 2017 changes. These changes have been passed in parliament and fall under the Treasury Laws Amendment (Housing Tax Integrity) Bill 2017. For residential property investors, Plant and Equipment depreciation deductions will be limited the following:

For properties purchased post 9 May 2017, you are able to claim Plant and Equipment depreciation if:

• the property you purchased is new and you have not lived in it;
• if you have purchased Plant and Equipment items to be installed in the property and you have not used them for personal use; or
• a company owns the property.

For properties purchased pre 9 May 2017, you are able to claim Plant and Equipment depreciation if:

• the property you purchased was used as a rental property some time during the 2016/2017 financial year;
• if you have purchased Plant and Equipment items to be installed in the property and you have not used them for personal use; or
• a company owns the property.

Commercial, industrial and rural properties are not affected by the 2017 changes to property depreciation.

Rural property owners can depreciate items including, buildings, sheds, yards, silos, horticultural plants etc. Fencing, water infrastructure and fodder storages are no longer claimable for properties purchased after 12 May 2015. Properties purchased prior to this date can still make these claims.

A depreciation schedule involves:

·         A full inspection of your property to identify all depreciable items

·         An historical construction cost estimate of the capital works allowances building and structural improvements

·         Valuation of all Plant and Equipment items

·         Preparation of a report which is accepted by the ATO and summarizes the depreciation allowances for the future years

A depreciation schedule Melbourne is an essential tool for all residential property investors, commercial property owners and rural producers looking to maximize the benefits of owning an income generating property. If you don’t have one, you could be missing out on thousands of dollars each year in allowable depreciation.