As a property investor, you’re likely looking for ways to increase your rental income and reduce your taxable income. One strategy that's often overlooked is claiming property depreciation. By having a tax depreciation schedule prepared for your residential rental property, you can boost your cash flow through annual tax deductions. For brand new properties, a depreciation schedule helps you claim deductions for both capital works (building allowance) and plant and equipment assets, maximising your tax benefits each financial year. However for second-hand residential properties, there is no depreciation deductions on plant and equipment.

A depreciation schedule for rental property not only helps you claim deductions on depreciating assets, it ensures all claims comply with Australian Taxation Office regulations. This includes deductions for both Division 43 capital works and Division 40 plant and equipment depreciation. Without a proper rental property depreciation schedule, many investors miss out on potential tax depreciation benefits that could make a big difference in their overall tax return.

Why investors need a depreciation schedule

A depreciation schedule helps maximise tax deductions on the wear and tear of your investment property. Property investors can claim deductions for both capital works and plant and equipment assets. By claiming depreciation, you can reduce your taxable income and increase your cash flow over the property’s effective life, often up to 40 years.

A properly structured depreciation schedule maximises your deductions and boosts your investment’s cash flow. Qualified quantity surveyors can provide an accurate depreciation report for your residential rental property, ensuring you claim the full benefits.

What is a tax depreciation schedule and how can it improve your tax return?

A depreciation schedule is a detailed report that outlines the tax deductions you can claim for your investment property. It breaks down the value of the property, including construction costs and all fittings and fixtures, helping you identify the tax-deductible expenses you can claim.

The schedule covers both Division 40 (plant and equipment assets) and Division 43 (capital works), showing how much these assets have depreciated and how much they will continue to depreciate. This allows property investors to see the exact amount they can claim for tax depreciation, providing a clear financial benefit.

A professional quantity surveyor, typically a member of the Australian Institute of Quantity Surveyors, prepares the tax depreciation schedule. The surveyor will inspect your property, assign values to each asset, and ensure your deductions are accurately calculated. This process ensures you claim the maximum depreciation deductions available for your investment property.

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What does a tax depreciation schedule include for your property?

A tax depreciation schedule typically includes several important components to help you maximise your tax deductions for an investment property.

Here's what you can expect:

Introduction and glossary

This section explains the schedule and provides a glossary of key terms to help you understand how depreciation works for your property.

40-year estimate for Division 43

This includes a detailed estimate of all capital works items, outlining how much you can claim over the next 40 years.

Depreciation methods

The schedule provides examples of both the prime cost and diminishing value methods, allowing you to choose the best depreciation approach for your circumstances.

Division 40 asset details

You will find the effective life and depreciation rate for each plant and equipment asset, helping you calculate the deductions for these items.

Low-value pools and instant asset write-offs

It also breaks down assets that qualify for low-value pooling or an instant asset write-off, ensuring you take advantage of every available tax benefit.

How to get a depreciation schedule for your rental property

To create an accurate depreciation schedule, you’ll need a quantity surveyor—one of the few professionals the Australian Taxation Office (ATO) recognises for estimating construction costs and valuing assets. To get started, contact a qualified quantity surveyor for a quote.

Once you’ve selected your provider, the process of purchasing a rental depreciation schedule is simple. Most quantity surveyors offer the option to complete this over the phone or online. They will typically assess your property online to ensure it’s worth proceeding, conduct all necessary property searches, and arrange an inspection with your property manager and tenant. For brand new properties where plans and asset details are available, an inspection may not be required.

Choosing a reputable quantity surveyor ensures your depreciation schedule is thorough and compliant with ATO standards, helping you optimise your tax deductions with minimal hassle.

Benefits of a depreciation schedule for your investment property

Having a tax depreciation schedule professionally prepared by a quantity surveyor offers several distinct advantages for property investors:

Easier property investment decisions

It can make your first or next investment property more financially appealing, supporting your efforts to build wealth from real estate.

Improved cash flow

By accurately calculating your depreciation, you can potentially shift a negatively geared property towards a better cash flow position, reducing out-of-pocket expenses.

One-time expense with ongoing benefits

Unlike many property-related costs, a depreciation schedule is a once-off investment, allowing you to claim tax deductions year after year without additional spending.

Tailored to maximise deductions

The schedule is specifically designed to ensure you claim every eligible deduction for both new and existing properties, following all Australian tax laws and guidelines. This helps you get the most financial benefit from your investment.