Establishing a depreciation schedule and understanding the other tax benefits of owning an investment: What no one tells you about
One of the first things to do after buying your investment property is to arrange a depreciation schedule – even if your home isn’t brand new.
Many investors have never heard of a depreciation schedule. I know I hadn’t when I bought my first investment property. There are many different ways this can be explained technically as it is linked to the Australian Taxation Office (ATO), but simply put, a depreciation schedule is a list of items included in your investment property that can be depreciated at a certain rate over a period of time that you can claim as a tax deduction against your taxable income.
Another common misunderstanding is that only investors with newly built homes should obtain a depreciation schedule. This is untrue. As an investor your depreciation schedule starts from the point of settlement on your property.
Accountants are not generally qualified to prepare a depreciation schedule and, therefore, it is far better to engage a depreciation specialist. For the cost of a few hundred dollars (tax deductable dollars) you could save yourself thousands in tax dollars.
Your depreciation specialist will require an inspection of your property where he or she will note appliances, age of inclusions, brands of inclusions, take measurements of the property, and then prepare a detailed report. This report will give an accurate list and amount of what is a tax deductable depreciating item in your investment property.
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