Depreciation is what happens to an item over time – they loose their value due to wear & tear. This can be from household appliances to the actual house itself. Just like you claim depreciation on your car – you can also claim depreciation on your investment property.
A Depreciation Schedule is a report that breaks the property down into different categories, determining the building write-off claims and depreciation of your investment which goes as a deduction against your taxable income. Based on your allowances the report determines how much you can deduct each year as part of your tax return.
A Depreciation Schedule is conducted by a Quantity Surveyor and is designed to ensure that you are getting the most possible cash return from your investment property. There are 2 elements to a Depreciation Schedule, the Capital Works Allowance (Structural & Irremovable Assets ie brickwork) and the Plant & Equipment (Removable Assets that depreciate at a faster rate than the irremovable assets ie dishwashers).
This one off report will last 40 years on the property.
Why get a depreciation schedule on your investment? A depreciation schedule will save you money on your tax each year. It is a one off report and will save you much more money over time than the cost of the report itself.
Depreciation allowances combined with additional negative gearing factors such as interest on a mortgage and repairs and maintenance will help investors reduce their taxable income, pay less tax and create positive cash flow.
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