As a Quantity Surveyor, I often field questions from property investors about whether a depreciation report is worth the investment. Given the intricacies of Australian tax laws and property investment, it’s crucial to understand the potential benefits and implications of obtaining such a report. If you’re a property investor contemplating whether a depreciation report is a good move for your portfolio, here’s a detailed guide to help you make an informed decision.

What is a Depreciation Report?

A depreciation report, often known as a tax depreciation schedule, is a detailed document prepared by a qualified Quantity Surveyor. It outlines the depreciation deductions you can claim on your investment property. Depreciation refers to the gradual reduction in value of the property’s assets over time due to wear and tear. The report categorises and quantifies these depreciable assets, allowing you to maximise your tax benefits.

Why Consider a Depreciation Report?

1. Maximise Tax Deductions:
   One of the primary benefits of a depreciation report is its ability to uncover tax deductions that many investors might overlook. Australian tax law allows investors to claim depreciation on both the property’s structural elements (e.g., roofing, walls) and the plant and equipment assets (e.g., appliances, fixtures). A comprehensive depreciation report ensures you’re capitalising on these opportunities, potentially saving you thousands of dollars each year.
2. Increase Cash Flow:
   By claiming depreciation, you effectively reduce your taxable income, which can result in significant tax savings. These savings can then be reinvested into your property or used to improve your overall cash flow. For new investors, this can be particularly beneficial in the early stages of property ownership when cash flow management is crucial.
3. Asset Evaluation:
   A depreciation report provides a thorough evaluation of the assets within your property. This detailed assessment not only helps in tax planning but also gives you a clearer understanding of the value and condition of your property’s assets, which can be useful for future planning or property sales.
4. Enhance Property Value:
   For those looking to sell, having a depreciation report can be advantageous. Potential buyers often appreciate having detailed information on the property’s depreciation status, which can impact their investment decisions. A well-maintained property with a clear depreciation history may also fetch a better price.

Who Should Get a Depreciation Report?

• New Property Investors: If you’ve recently purchased a property, a depreciation report is a smart investment. New properties typically offer more substantial depreciation opportunities, especially for plant and equipment, which are still in good condition.
• Owners of Investment Properties: Even if you’ve owned the property for some time, it’s not too late to benefit. You can still claim depreciation on any improvements or renovations made to the property, as well as the remaining depreciation on existing assets.
• Renovators and Renovation Enthusiasts: If you’ve recently renovated your investment property, a new depreciation report can help you capture the benefits of these improvements. Renovations often enhance the value and functionality of a property, which can be reflected in your depreciation claims.
• Owners of Bricks and Mortar Businesses: If you own a physical commercial premises, you too can benefit from the depreciation of the improvements, fit-out of the premises.

How to Obtain a Depreciation Report?

To ensure accuracy and compliance with Australian tax laws, it’s essential to hire a qualified Quantity Surveyor to prepare your depreciation report. These professionals are trained to identify and value all depreciable assets, providing a comprehensive and compliant report.

Conclusion

In summary, obtaining a depreciation report is generally a worthwhile investment for Australian property investors. The potential tax savings, improved cash flow, and better property valuation can outweigh the initial cost of the report. Whether you’re a new investor, an owner of a long-held property, or someone who has recently undertaken renovations, a depreciation report can offer significant financial advantages and help you make the most of your investment.

If you’re considering getting a depreciation report or have more questions about how it can benefit your property investment strategy, feel free to reach out. As always, it’s essential to consult with a professional Quantity Surveyor to tailor the report to your specific needs and ensure you’re making the most informed decisions for your investment portfolio.

Happy investing!

Mathew Kulkewycz

BWK Group
Senior Quantity Surveyor