What is a depreciation schedule, and why do you need it?

Depreciation is often overlooked when it comes to the deductions you make each year at tax time. On average, in the first financial year, investors can expect to claim around $9,000 in depreciation deductions.

Capital Works Deductions

Structural wear affecting roofs, walls, doors, and cupboards qualifies as capital works deductions on properties built after September 15, 1987. The deduction rate remains constant at 2.5 per cent each year for forty years.

Plant and Equipment Assets

Removable fixtures — including carpeting, blinds, air conditioning units, water heating systems, and smoke alarms — fall under this category. The ATO determines effective asset lifespans for calculation purposes.

Regulatory Framework

Under regulations enacted in November 2017, owners purchasing established residential properties after May 9, 2017 cannot claim deductions on previously-used plant and equipment. Only brand-new assets qualify once the property generates rental income.

Renovations

Property owners should obtain depreciation schedules before renovating rental properties. Deductions cannot be claimed for items installed while the owner occupies the property; the dwelling must be leased first.

We recommend consulting with your accountant for personalised guidance on depreciation deductions.

This article does not constitute financial or legal advice.