Thrifty Tax Depreciation is asked this question a lot. An accountant is able to prepare a depreciation schedule for an investment property where all costs are provided by the builder for example as below.
| Asset | Value |
|---|---|
| Building | $100,000 |
| Oven – Miele H series 2860 | $3,200 |
| Air-conditioning unit 2.5kW Panasonic | $1,200 |
The trouble is that all new builds do not always come with a complete asset breakdown as below and the Building Contract is often shown as a ‘lump-sum’ cost that is provided to the purchaser or investor. i.e. you may find a contract that will show $250,000 and show all the items that are included but without value. Where Thrifty Tax Depreciation can help is that we can estimate the cost of each asset as per our legal capabilities as set out by the ATO.
Shown below is the benefit of a quantity surveyor over an accountant. An accountant will only be able to provide a limited rate of depreciation of 2.5% on the whole building contract as per division 43 as no asset values are provided to the accountant.
For example, if the building contract shown is $250,000.00, then the accountant will depreciate your rental property as follows:
| Building Value | $250,000 |
|---|---|
| Rate of depreciation as per division 43 | 2.5% |
| Year 1 | $250,000 x 2.5% = $6,250 |
| Year 2 | $6,250 |
| Depreciation claimed in 2 years | $12,500 |
A quantity surveyor’s depreciation schedule can be seen as below based on the same scenario:
| Building Value | $180,000 |
|---|---|
| Rate of depreciation as per division 43 | 2.5% |
| Rate of depreciation for air-con, carpets etc | 10-15% |
| Year 1: building | $180,000 x 2.5% = $4,500 |
| Year 1: plant and equipment | $7,000 |
| Year 1: total depreciation | $11,500 |
| Year 2: building | $4,500 |
| Year 2: plant and equipment | $5,500 |
| Year 2: total depreciation | $10,000 |
| Depreciation claimed in 2 years | $21,500 |
As you can see, a Thrifty Tax Depreciation Schedule prepared for a rental property that costs $250,000 to build will yield $21,500 more in depreciation a report prepared by an accountant where a standard Building Contract is provided. The clear advantage that Thrifty Tax Depreciation has is that it is able to value the plant and equipment in a rental property by professional assessment; something that is not legally achievable by an accountant.
The case is also similar where a property investor purchases an existing property with second-hand plant and equipment, a quantity surveyor will be able to assess for depreciation for old assets regardless of age. We have completed tax depreciation schedules for clients with properties as old as 1965. See ‘Can I claim depreciation an existing property? Order your report today!
