Savings in Taxable Income

Not many people (4 out of 5) do not know about deductions they can get from property depreciation. The depreciation of investment properties, meant for income purposes can be used in gaining a significant tax deduction. The Melbourne tax depreciation schedule, as ruled by ATO (Australian Taxation Office) is the first step.

Like most things, the depreciation value of man-made goods naturally erodes in time and the natural wear and tear, there is a general decline in the property’s price. From an overall point of view, this is not really that bad at all.

Depreciation schedule

This is an accounting procedure where the amount of value left in each piece of equipment is determined. Getting a schedule and depreciation report for a property you recently purchased is a good move.

For one, it helps you understand of saving more on your taxable income. Likewise, it helps you have a fair idea on the lifespan of your properties and help you make your plans accordingly. Also, you will appreciate that the depreciation of your investment properties, meant for income purposes, can be used to gain significant Melbourne tax depreciation.

Methods

The depreciation has two methods used in calculation. The first one is the Straight line method. The depreciation is calculated according to the cost price of the asset and has the same amount deducted every year.

The other one is the Diminishing value. The amount of depreciation here is the result of the adjusted tax value of the asset. This is the original cost of the asset minus the depreciation incurred over the years.

Deductions

Another term of the depreciation is property depreciation. This is given on residential or commercial investment properties, and there are two types of deductions available.

In the Depreciation on Building Allowance, the cost of the construction of the building is the only factor considered. These would include things like concrete, flooring, brickwork, plumbing and others.

With Depreciation on Plant and Equipment, the list of items is limited only to the activity of the plant or commercial establishment. Everything in the plant – the tiles all the way to the light fixtures is part of the exhaustive list made of all the items in the building.

Benefits

The diminishing value method actually helps the investor to claim a large chunk of the deduction faster. The straight line method helps the investor pace it out. Either one of these methods can be used depending on the situation and the client’s decision.

Rental property depreciation or investment property depreciation will both help you reach the same figures using either method. The owner will stand to gain a healthy deduction on his or her taxes.

Getting a depreciation schedule for a rented property before renovation can be very handy when filing for a property depreciation expense. While the ATO wants to know how much you spent, still it would entail a large deduction.

Done right and seen from a positive view, Melbourne tax depreciation is actually a great help.