It used to be the case that every single residential property that needed a depreciation schedule had to be physically inspected.
This was to ensure nothing was missed and the maximum deductions could be claimed, so investors could get the most amount of money possible back in their pocket.
But since the legislative changes made to depreciation deductions back in May 2017 - whereby second-hand properties could no longer claim Plant & Equipment depreciation unless the items were brand new - depreciation schedules can now sometimes be prepared without a physical inspection (while still ensuring the maximum deductions).
And that’s a bonus during a time of a global pandemic, when social distancing is key!
We assess each property, but as a general guideline, how do you know if your property needs a physical inspection for a depreciation schedule to be created?
5 reasons why some properties DO NOT require a physical inspection:
- Existing information is on hand – In 40 years we have amassed an extensive database of construction costs for the majority of residential and commercial buildings around Australia. We can access these records to assess the depreciation available on your property, without having to see it in person.
- We have the costs – We are familiar with your building and already have the construction costs on file, so another physical inspection is unnecessary.
- Plant & Equipment no more – You have purchased a second-hand property so you can’t claim on the existing Plant & Equipment components unless they’re brand new, in line with the legislative changes made to allowable depreciation deductions in 2017. You can still claim depreciation on the building structure, but an inspection isn’t usually necessary for this.
- Online data – There is plenty of detailed information and pictures of your specific property available online (both publicly and via subscription-based industry databases). We can use this to prepare your depreciation schedule, rather than doing a physical inspection.
- You have the costs – Your property is a brand new build and you have access to the construction cost, plans and inclusions list. If you can provide this to us we can use this detail to prepare a depreciation schedule.
5 reasons why some properties DO require a physical inspection:
- Your residential property is unique – If your property is out of the box, classed as High Spec/Luxury/Non-Standard, and therefore not typical, you will need an inspection. A physical inspection will ensure nothing is missed in the assessment so you can claim maximum deductions for depreciation.
- Your property is non-residential – Commercial properties can claim depreciation on both Plant & Equipment and the Building. Getting an inspection means you can still claim the full benefits of depreciation for all Plant & Equipment items (carpets, blinds, etc.), without anything being forgotten.
- Renovated – Your property has been substantially renovated and there is insufficient information online to calculate depreciation on Plant & Equipment items, so an inspection is necessary to maximise depreciation.
- More information required – If there isn’t access to sufficient information specific to your property, we will need to conduct an onsite assessment to gather the details we need.
- Plant & Equipment – If your property qualifies for Plant & Equipment deductions, an inspection ensures no assets are missed to maximise your deductions.
A depreciation schedule prepared without a physical inspection will be cheaper and you’ll receive it faster, but we’ll only recommend it if it’s in your best interest, and you’ll still be able to claim the maximum depreciation deductions. In some cases we’ll need to see the property to ensure you get the maximum claim for deductions.
Contact us to find out how to best obtain your depreciation schedule. We’ll assess your property and advise whether an in-person inspection is required or not.
Depreciation Schedules - The New Reality | Washington Brown
Tyron Hyde is the CEO of Washington Brown and is considered one of Australia’s leading experts in property tax depreciation. He is also a registered tax agent. Washington Brown manages construction costs worth over $2 billion and completes 10,000 schedules annually. For a depreciation schedule quote CLICK HERE and follow the 3 simple steps or estimate your depreciation cost.
The Washington Brown Free Depreciation Calculator will give you an estimate of the depreciation deductions you could claim on your investment property
Read more Expert Advice articles by Tyron
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.
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