Quick Answer
A tax depreciation schedule shows the deductions your client may be able to claim each year for eligible plant, equipment and capital works. The key sections to review are the summary page, Division 40 assets, Division 43 capital works, ownership details, assumptions and any notes about residential depreciation restrictions.
For accountants, a tax depreciation schedule should make the tax claim easier, not harder.
A good schedule should clearly show:
- Client name and property address
- Ownership percentage
- Property type
- Inspection or assessment basis
- Date available for rent or income-producing use
- Division 40 plant and equipment
- Division 43 capital works
- Low-value pool calculations where relevant
- Year-by-year deduction summary
- 40-year projection
- Assumptions and exclusions
- Notes about second-hand residential plant and equipment
- Any capital loss or CGT-related notes
The first section to review is usually the annual deduction summary. This gives the accountant the total claim for the relevant financial year.The next section is Division 40. This covers depreciating assets such as appliances, blinds, carpet, air conditioning, furniture, commercial equipment and other eligible plant.
The next section is Division 43. This covers capital works, generally the building structure and eligible improvements.
For residential property purchased after 9 May 2017, accountants should check whether the schedule has excluded second-hand plant and equipment where required. Capital works may still be claimable.
For commercial property, the schedule may be more detailed because commercial assets can include fit-out, services, furniture, tenant works, leasehold improvements and plant.
Koste.ai can help accountants and clients keep depreciation information in one place, request reports, manage property details and understand where deductions may exist.
Frequently Asked Questions
What is Division 40?
Division 40 covers plant and equipment assets that depreciate over their effective life, such as appliances, carpet, blinds, air conditioning and hot water systems.
What is Division 43?
Division 43 covers capital works, which generally includes the building structure and eligible construction improvements, depreciated at 2.5% per year over 40 years.
Can my client claim both Division 40 and Division 43?
Yes, eligible properties can attract both types of deductions, although the specific rules depend on the property type, purchase date, ownership and use.
What are the second-hand residential rules for depreciation?
From 9 May 2017, investors who purchase second-hand residential properties generally cannot claim depreciation on pre-existing plant and equipment. Capital works deductions may still apply.
What does the 40-year projection in a depreciation schedule show?
It shows the estimated annual depreciation deductions available over the remaining useful life of the building and assets, helping accountants and investors plan future cash flow.
Written by Koste Team · Koste Chartered Quantity Surveyors · AIQS Member · RICS Member · TPB Registered · 1300 669 400 · info@koste.ai