Common Depreciation mistakes

One of the most common mistakes property investors make is not seeking professional advice when it comes to depreciation- and this means that many depreciable items are simply missed.

There are more than 6000 depreciable plant and equipment assets listed by the ATO so to ensure that any of these items are not missed, it is advisable to engage a specialist quantity surveyor, who can create a depreciation schedule.

A depreciation schedule will outline each claimable item of your property’s building structure, fixtures and fitting.

Schedules also outline capital works deductions for structural elements contained in the property such as:

• Walls

• Floors

• Ceilings

They will also include eligible plant and equipment depreciation for items such as

• Hot water systems

• Blinds

• Stoves

Many investors also make the mistake of categorizing assets incorrectly, ie- carpets categorized as permanently fixed instead of a removable asset

Some investors also don’t realise that if they make a mistake and don’t claim the full entitlement, that the ATO allows tax returns to be adjusted for 2 years after the initial submission.

Also, some co-owners make the mistake of calculating depreciation first and then splitting the deductions based on ownership percentage.

Depreciation legislation allows co-owners to split an asset’s value by ownership percentage first, potentially qualifying them for higher rates of depreciation.

Co-owners can request a split depreciation schedule to ensure deductions are outlined based on each owner’s interest in the assets contained within the investment property.

Repairs and maintenance expenses are claimed differently to capital improvement and should be claimed as an immediate deduction in the year the expense was incurred.

Any capital improvement must be claimed as a capital works deduction or as plant and equipment depreciation.

Marlene Liontis
Thursday, 4 April 2019

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