TAX DEPRECIATION

TDQS Pty Ltd
Quantity Surveyors

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An allowance for wear and tear for income producing property and its assets such as plant and equipment which values are declined over the time. Tax depreciation schedule is also commonly known as Capital Allowances report in commercial property industry.

Under the Income Tax Assessment Act 1997, The Australian Tax Office (ATO) allows income producing owners to claim deduction for depreciation against their personal tax and rental income tax. Depreciation claimable under this legislation are Plant and Equipment - Division 40 and Capital works deductions - Division 43.

Plant and Equipment (Division 40)

An asset which has limited effective life reasoanably be expected to to decline in value over the time it is used. The effective life of these assets are varying according to its uses and industry such as residential, offices, hotel, industrial warehouse, manufacturing factory etc.

Examples of plant and equipment are: -

✓ Air conditioning unit

✓ Carpet

✓ Cooktop

✓ Freestanding furniture

✓ Hot water unit

✓ Microwave & oven

✓ Rangehood

✓ Smoke detector

✓ Swimming pool filtration

✓ Partition and doors

✓ Roof

✓ Foundation

✓ Kitchen Joinery

✓ Driveway

✓ External Walls

In compliance with ATO, our effective lives used are based on the Commisioner of Taxation rates.

Capital works Deductions (Division 43)

Tax deduction for the building structure and fitings that are permanently fixed to the structure of the building which attracts low depreciation rate at 2.5% or 4% over a period of 40 or 25 years, depending on the property use and its industry. The depreciation of Capital Works deductions are based on historical construction costs, its age and use of the building at the time.

Examples of residential's Division 43 are: -

Timeline for Capital Works Deductions with depreciation rate based on the original construction costs.