Why Your Clients Need a Tax Depreciation Schedule From Duo Tax
Property investors often focus on location, rent, and capital growth when seeking returns. However, many miss one of the most effective tax strategies: a tax depreciation schedule. This schedule allows residential property investors to claim depreciation deductions for the natural wear and tear of their investment property and its plant and equipment assets.
For accountants and financial professionals, recommending a tax depreciation schedule is more than a housekeeping exercise. It helps clients reduce taxable income, improve cash flow, and maximise deductions, enabling them to grow their portfolio faster and save thousands in tax benefits.
This article explains what a tax depreciation schedule is, how it works, and why every property investor should have one to claim all the deductions they are entitled to.
What is a Tax Depreciation Schedule?
A tax depreciation schedule is a comprehensive, ATO compliant depreciation report that shows how much a property owner can claim each financial year for the decline in value of a building and its equipment assets. It sets out these tax depreciation deductions in a detailed, year-by-year format approved by the Australian Taxation Office (ATO).
The report covers two main categories:
- Capital Works Deductions (Division 43): Fixed structural elements like walls, roofing, concrete, and plumbing. These capital works allowances are usually claimed at 2.5% per year over forty years.
- Plant and Equipment Depreciation (Division 40): Removable assets inside the property that wear out or need replacing, such as carpets, hot water systems, blinds, air conditioning units, and appliances. Each item has its own effective life as set by the ATO.
Only a qualified Quantity Surveyor, recognised by the Australian Institute of Quantity Surveyors and compliant with the latest government rulings, can prepare these tax depreciation reports.
The ATO does not allow accountants or property managers to estimate construction costs or asset values for depreciation purposes. Using a professional ensures every eligible item is captured and claimed correctly, maximising deductions and tax benefits.
Why Property Investors Need A Depreciation Schedule
For many clients, a tax depreciation schedule is the difference between average and outstanding investment results. It uncovers valuable depreciation allowances that directly improve after-tax income and cash return.
Key advantages include:
- Lower taxable income: Depreciation deductions reduce the amount of income subject to tax. Many residential investment property owners can claim thousands of dollars each financial year.
- Better cash flow: With a smaller tax bill, investors keep more money in their pocket to cover loans, reinvest, or expand their portfolio of income producing properties.
- Stronger returns: Every tax saving flows through to the bottom line, improving overall return on investment and helping to save thousands over time.
- Wide eligibility: New builds, existing properties, older properties with renovations by a previous owner, and commercial buildings can all benefit from rental property depreciation schedules and capital works deductions.
Depreciation is unique because it is a fully tax deductible, non-cash deduction. Unlike interest or maintenance costs, investors do not need to spend money to access this benefit. It simply reflects the natural decline in value of the property and its assets according to the ATO guidelines.
Common Client Questions
Accountants often hear the same concerns about tax depreciation schedules. Clear answers help clients feel confident in the process.
Is a depreciation schedule worth it?
Yes. In almost every case, the tax savings and maximum deductions outweigh the one-off cost, which is also fully tax-deductible.
Can accountants prepare these reports?
No. The ATO requires registered tax agents who are qualified Quantity Surveyors to prepare the schedule. Accountants then use the detailed depreciation report to process the annual claims on the financial year tax returns.
Do older properties qualify?
Yes, in many cases. While the original structure may be too old to qualify for depreciation, renovations or newly installed assets by the current or previous owner may still be depreciated, allowing investors to claim missed depreciation deductions.
Can clients claim for past years?
Yes. Tax returns can usually be amended for up to two financial years, allowing clients to catch up on missed depreciation deductions and maximise their tax benefits.
Case Studies and Examples
Practical examples show how powerful tax depreciation reports and schedules can be.
Residential apartment: An investor buys a brand-new unit with carpets, blinds, air conditioning units, and modern appliances. The investment property depreciation schedule captures both structural capital works deductions and plant and equipment depreciation, saving several thousand dollars in the first financial year.
Older home with renovations: A property built before 1987 is purchased. While the original structure itself is no longer eligible for capital works deductions, any renovations completed in the last decade are claimable, along with any equipment assets installed brand-new.
Commercial office fit-out: A business owner buys an office building with lighting, partitions, and air conditioning. The depreciation schedule spreads deductions over the effective life of each asset, improving cash flow and freeing capital for reinvestment.
How to Get Started With Tax Depreciation
The process of arranging a tax depreciation schedule is simple:
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Engage Duo Tax qualified Quantity Surveyors – Our team are fully qualified and experienced in preparing ATO compliant depreciation reports and tax depreciation schedules.
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Inspection and data collection – The property is reviewed in detail to identify every structural component and equipment asset for depreciation purposes.
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Preparation of the report – A 40-year tax depreciation schedule is created, including both prime cost and diminishing value methods to maximise deductions based on individual circumstances.
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Use in tax returns – The depreciation report is passed to the accountant or registered tax agent, who applies the tax depreciation deductions each financial year.
This is a one-off investment that delivers tax benefits and cash return for decades.
Speak With Duo Tax About Depreciation Schedules
A tax depreciation schedule is one of the simplest and most effective ways for residential property investors to reduce tax and boost returns on their investment properties. It ensures compliance with ATO requirements, captures every eligible depreciation allowance and deduction, and provides financial benefits long into the future.
For accountants and financial advisers, recommending a schedule shows expertise and helps clients achieve stronger results. The process is straightforward, the cost is fully tax deductible, and the rewards are significant.
If your clients have not yet arranged a depreciation schedule, now is the time to act. Partner with our team of qualified Quantity Surveyors and make sure no depreciation deductions go unclaimed.
