A tax depreciation schedule lists an investment property’s depreciable building, plant and equipment items and will allow you to claim these depreciation expenses as tax deductions.
While obvious features such as walls, carpets and bathroom fittings are always included in tax depreciation schedules, don’t overlook these five not-so-obvious depreciable items:
- Common property items within strata apartments and units
A tax depreciation schedule for an apartment or unit will list all depreciable building and plant elements within the actual unit (doors, kitchen fittings and so on). The schedule should also include your portion of common property items outside the unit’s front door, such as the entry foyer, basement, air conditioning, lift, fire extinguishers, ventilation and hot water system.
- Outdoor elements
Common outdoor elements should also form part of the depreciation allowances, including fences, paths, swimming pools (where they qualify), BBQ areas, and “hard landscaping” items such as retaining walls and pergolas. Be aware that you can’t claim “soft landscaping” ie. Turf, plants, mulch etc.
- Scrapping of items made obsolete during renovations
When completing a renovation you may be able to claim the scrapping value of obsolete items you’re getting rid of. The scrapping (or residual) value of an item is its estimated value at the end of its useful life.
Have a Quantity Surveyor prepare a schedule prior to the renovation works, that will ensure you’re able to claim for anything that you’re throwing away. The resulting tax deduction you’re entitled to will be based on the “loss” you incur by throwing out old carpets, kitchens appliances and other assets.
- Design & professional fees
Fees paid to design and development professionals can be claimed within your tax depreciation schedule as part of the total construction cost. For new builds, include costs for architects, engineers and designers when compiling information for your Quantity Surveyor.
- Council costs associated with renovation or new build
Council permits, application fees and a portion of the costs a developer might spend on infrastructure (e.g. footpaths, gutters and community playgrounds) can also be included in your tax depreciation schedule.
Tax deductions can make or break an investment property’s financial performance. By engaging a registered Quantity Surveyor to compile a professional tax deprecation schedule you can literally save thousands of dollars. Don’t invest in property without one.