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The Importance of a Tax Depreciation Schedule for your Rental Property

Date: 22 November 2023

Maximising Your Investment: The Importance of a Tax Depreciation Schedule for Your Rental Property

Investing in a rental property is often a smart financial move, but it’s essential to take advantage of every opportunity to maximise your returns. One often-overlooked aspect of property investment is claiming depreciation on your property’s assets. To do this effectively, you’ll need a tax depreciation schedule.

What Is a Tax Depreciation Schedule?

A tax depreciation schedule is a comprehensive report prepared by a quantity surveyor outlining all the depreciable items within your rental property and calculates the deductions you can claim. Claiming depreciation as a deduction can significantly reduce your taxable income, leading to lower tax liabilities.

Why is a Tax Depreciation Schedule Important?

  1. Maximising Tax Deductions: A depreciation schedule allows you to claim deductions for the wear and tear on your property. This includes new items purchased, such as appliances, carpets, air conditioning systems, as well as the building itself. The cost of having the schedule prepared is also a deductible expense.
  2. Cash Flow Improvement: Lowering your tax liability directly impacts your cash flow. The deductions you claim through depreciation can help you retain more of your rental income.
  3. Increasing Property Value: Improved cashflow can be reinvested in your property, to improve the property’s value and potentially increase weekly rental income. Any new expenses made towards improving the property could potentially be a depreciation deduction.

How to Get a Tax Depreciation Schedule

  1. Engage a Quantity Surveyor: The first step is to engage a qualified and experienced quantity surveyor. These professionals are experts in assessing and calculating the depreciation of your property’s assets.
  2. Property Inspection: The quantity surveyor will conduct a thorough inspection of your rental property, identify all depreciable assets and assess their condition.
  3. Preparation of the Schedule: Using the information gathered during the inspection, the quantity surveyor will prepare a comprehensive tax depreciation schedule. This schedule will outline all the depreciable assets, their respective values, and the depreciation deductions you can claim over time.
  4. Consult with Your Accountant: Once you have your tax depreciation schedule, consult with your accountant to ensure you claim the deductions correctly when you file your tax return.

A tax depreciation schedule is an invaluable tool for any property investor, allowing you to claim deductions on your rental property for costs that may have already been incurred. By maximising your tax benefits, you can improve your cash flow, reduce your taxable income, and enhance the overall profitability of your property investment. To get started, engage a qualified quantity surveyor and take advantage of this often missed opportunity to optimize your financial returns.

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