Our Tax Depreciation Calculator powered by MCG Quantity Surveyor assists you to have an estimate of the expected deductions for depreciation. This can be claimed for all properties such as commercial, residential and manufacturing buildings.
How to use the Tax Depreciation Calculator
Choose Property Type (Construction Type, Quality of Finish), Estimated Year of Construction, Estimated Floor Area, Year of Purchase, State then click CALCULATE and wait for results.
What the results will show: minimum and maximum depreciation deductions which can be obtained for your property investments between 1 and 5 full years. *Note that this is just an estimate only, not to be used for taxation purposes.
The results for the property’s estimated depreciation for the first five years are divided into two categories: Plant and Equipment (removable assets) And Division 43 or Capital Works Allowance. The reduced tax payable table, on the other hand, shows the estimated minimum and maximum tax refund based on the inputted marginal tax rate.
It is a fact that 70% of property investors in Australia do not have a tax depreciation schedule.
Depreciation schedule is a highly valuable and helpful tool to maximise returns for property investors though it is often underused.
It’s incredible how investors are leaving money on the table considering that depreciation is basically the 2nd-highest tax deduction on one’s property after loan interest, a food for thought.
So, what then is a depreciation schedule – what benefit can you get from it?
What is Tax Depreciation?
All buildings do not remain new and of course, get old – in the same way that all assets inside the structure go through the usual wear and tear. With this, we expect that every single year – the value of the property decreases and therefore, depreciates.
As permitted by the Australian Tax Office (ATO), all property investors who are able to make income from their properties can claim depreciation as a tax deduction.
In the field of property investing – there are two types of depreciation deductions:
Plant and Equipment (Division 40) – This refers to all the fixtures and fittings found within the building. They’re the easily removable assets such as air conditioning units, carpets, and so on.
Capital Works Deductions (Division 43) – This refers to the depreciation of the building’s structure. In general, the effective life of a residential building’s structure is 40 years, if constructed after September 1987.
What are the components of a Tax Depreciation Schedule?
A depreciation schedule usually has an introductory portion to the schedule with a corresponding glossary but to put it in simple terms:
A depreciation schedule is a type of report which provides all the details of the deductions for tax depreciation due on your property.
Claiming these tax-deductible costs includes recognizing the worth of a property — as well as all its fittings and fixtures.
The objective of a depreciation schedule is to provide a framework of values for both the Division 40 and Division 43 assets, on how much it has depreciated and will depreciate. It provides a quite accurate inkling of the amount that can be claimed for tax purposes.
The schedule report is usually organized by a professional quantity surveyor, who in turn inspects the property and puts a value to each asset.
- Some terminologies to assist you for a clear understanding on how the schedule works;
- 40-year estimates presenting all details of depreciable items in Capital Works (Division 43);
- A detailed listing of the assets included in the low-value groups and those items that are eligible for instant-asset write-offs.
- Plant and Equipment (Division 40) assets’ effective life and prescribe depression rates;
- Illustrations showing the prime cost as well as diminishing value depreciation methods to assist in making the decision that’s the most reasonable for one’s current personal situation.
How to Obtain a Depreciation Schedule:
To get hold of a depreciation schedule just merely requires you to contact a quantity surveyor.
To fulfil ATO’s requirements, the Australian Institute of Quantity Surveyors requires that the property is inspected before creating the depreciation schedule. Do you know that quantity surveying is one of the limited professions duly recognised by the ATO? A quantity surveyor is one who estimates both the past and present costs of a property, including its assets.
For a start – when you’re doubtful about getting a depreciation schedule, get in touch with a quantity surveying firm to have a free estimate of what could be claimed.
What do you need to consider as you purchase a Depreciation Schedule?
Have a professional Quantity Surveyor – a registered Tax Agent who is affiliated with the Tax Practitioners Board of Australia.
The surprising bonus is that the fees for quantity survey are a property tax deduction in Australia.
Employ a specialist provider who will do calculations and reports for Capital Allowances and Tax Depreciation (this being not a core business for most Quantity Surveyors). What a specialist performs will be actually to your advantage. He will be up-to-date with the most pertinent legislations as well as extra experienced in the interpretations of various tax rulings and legislations which can maximise claims for your specific personal circumstances.
One schedule gives out 40 years of claimable deductions (or the maximum allowable years) – so this means you only need to have your property inspected once.
First thing to do after receiving the Depreciation Schedule?
Once the depreciation schedule is completed – all you need to do is turn it over to your accountant, who will then submit the results for your property in your tax return each financial year.
When is the BEST Time to Buy a Tax Depreciation Schedule?
Maximising your annual deductions is your goal, thus, it is ideal to order and get your depreciation schedule generally before the financial year ends and that is on 30 June.
What’s our recommendation: Get a depreciation schedule even if your investment property is just recently purchased before the end of this financial year instead of waiting for next year. You are eligible in claiming partial deductions from the time you have owned the property. Likewise, one advantage of having this activity is that you also get to benefit with immediate write-offs. As the term implies – this simply means that any item in the Plant and Equipment category worth under $300 can be straight away written-off.
If you are still new in property investing and have missed on a few deductions – the ATO permits you to adjust your tax return to re-claim for up to past two financial years. But it is advised that you stay on top of all your finances so as not to get into unnecessary deficit and worst, too much stress.
What are the Advantages of a Depreciation Schedule?
The benefits of having a quantity surveyor providing a depreciation schedule is wide-ranging. Check them here:
- Allowing your first or succeeding property a more suitable and realistic option that will help you kick start your wealth-building goal;
- This can be the variance of having an improved cash flow vs. a negatively geared property;
- The schedule is designed to enhance all the benefits offered to you under the Australian Law for new and past properties.
- In contrast with other property deductions – a depreciation schedule is a once-off cost plus you can get deductions without spending money each financial year;
Tax Depreciation Calculator’s FAQs:
What is the Tax Depreciation Calculator? How does this work?
The Tax Depreciation Calculator’s objective is to provide the property investor an indicative estimate of the tax depreciation deductions applicable on certain properties. Our calculator finds comparable properties within our extensive database, and calculates an estimate based on these actual similar properties.
What makes this data helpful?
Many investors think only of depreciation after buying a property. Knowing such information upfront supports investors in making a more informed decision in choosing which property to buy.
What is so distinct about this Tax Depreciation Calculator?
MCG’s Quantity Surveyor’s patented Tax Depreciation Calculator is the first calculator which provides representation of accurate estimates through actual real properties. It lets you work out the likely tax depreciation deductions you can claim on your next property investment. By including this in your projections, this Tax Depreciation Calculator completes the “missing factor” in your investment property equation.
Is this Tax Depreciation Calculator accurate?
It is hard to get 100% accurate results as most properties are not similar. But MCG’s belief is that this calculator is useful as it is with the present available information on the huge number of properties they’ve inspected so far. They have an extensive database that is being accessed by their group. The results they provide in our calculator is an accurate estimate – rounded-off in the nearest thousand.
Are there properties not included in the Tax Depreciation Calculator?
For the Tax Depreciation Calculator – the properties which are not included are the renovated or fully furnished properties as these provide inaccurate results.
Is there a fee to use the Tax Depreciation Calculator?
It is free. Anyone can use our Tax Depreciation Calculator free-of-charge.
Will this Tax Depreciation Calculator estimate one’s tax return?
No. The property MUST first be appraised by a professional quantity surveyor to comply with the guidelines of both the Australian Institute of Quantity Surveyors and Australian Taxation Office (ATO). For individual properties, it is a must to assess the capital allowance, including the provision for an exact breakdown of plant and equipment.
What it means if nothing happens when “CALCULATE” button is pressed?
This simply means that there are no properties similar to the criteria you have. You may get in touch with MCG for a verbal estimate or request a report on your actual property.
What should I do if numbers appear to be wrong?
As we often exert our best efforts to guarantee that the information is accurate at all times, there could be discrepancies occasionally, due to cross-referencing with an extensive database. Please send MCG an e-mail so they can handle your issues immediately.
How is the age of the property identified?
The year the construction of the property commenced is a required information. In case you don’t have this, get in touch with the relevant local council for help.