A tax depreciation schedule is a report prepared for property investors that detail the depreciable assets related to owning an investment property. A properly prepared depreciation schedule will allow you or your accountant to easily and accurately claim the maximum depreciation for your property.

As property investors most of us are aware that over time it is the value of the land component of our properties that appreciate in value. We are also aware that the building, as it gets older and is used, decreases in value. The Australian Tax Office allows you to claim this loss in value against any income that the property may generate while being rented.

This loss of value is claimed in two ways.

Capital Works (Division 43): The capital works or structural components of a rental property can be claimed at 2.5% per year for 40 years. The Capital Works claims would include the value of all of those items that are fixed to the building and not easily removed. They would include things like concrete, bricks, windows etc.

Depreciating Assets (Division 40): The Australian Tax Office allows some items included in the property to be claimed over a shorter period of time.

These items are called depreciating assets and are recognised as those assets that can be easily removed from the property and include things like carpet, blinds, oven, dishwasher, air-conditioning etc. The claims that are calculated for the loss in value of depreciating assets is based on the Australian Taxation Office’s s recommended effective life for each item.

The combined claims for both the Division 40 & Division 43 for the average new 4 bedroom house may be between $9,500-$11,000 per year.

The goal of all property investors should be to maximise the returns on their properties. This can only be done through claiming all of the legitimately claimable expense that they incur whilst holding the property. By claiming these costs of holding a property and the depreciation on the property each year most investors would achieve significant tax savings. An investor earning $100,000 per year would reduce their taxable income to $90,000 per year based on the depreciation claims for an average 4 bedroom home. This would mean that the owner in this example would pay $4,000 less tax over the full financial year.