Written byA depreciation schedule is a report that lists an asset's cost, its effective life and the depreciation you can claim against income each year.
Also known as: tax depreciation schedule, quantity surveyor report, capital allowance schedule
Key points
- The schedule lists each asset you own, what it cost, how long it should last and the deduction for each year.
- Property investors usually buy one from a quantity surveyor, covering capital works on the building as well as plant and equipment items.
- Businesses often keep the same detail in an asset register, using either the straight line or diminishing value method.
- It is a record for your tax return, not a bill: it does not change what you paid or what you owe a lender.
- A schedule only helps where the asset earns assessable income, so any private use has to be taken out.
How a depreciation schedule works
The schedule starts with a list of what you own and what each item cost, including delivery and installation. Each item is then given an effective life, which sets how quickly its cost is written off. The preparer applies a method, prime cost or diminishing value, and works out the deduction for each year of ownership.
For a rental property the report usually splits in two: capital works on the structure, and separate items such as the oven, blinds, carpet and air conditioner. Established residential rentals are the exception: an investor who buys a previously used home cannot claim decline in value on the second-hand plant and equipment that comes with it, so only capital works and the assets the investor buys and installs are claimable. Your accountant copies the yearly figures into the tax return, and the written-down value carries forward until the asset is sold or scrapped.
Who needs a depreciation schedule
Anyone claiming depreciation on income-producing assets can use one. Property investors are the largest group, and on a newer building a surveyor's report often returns more than it costs. Businesses use schedules for vehicles, plant and machinery and shop fit-outs, and accountants lean on them at tax time.
Finance and depreciation sit side by side. Where a business owns the asset from settlement, as it does under a chattel mortgage, it claims depreciation while it repays the loan. Effective life rules and write-off concessions change, so check current ATO guidance or ask your accountant.
Example
A Brisbane investor buys a four-year-old townhouse and pays a quantity surveyor to prepare a depreciation schedule. Because the home has been lived in, the second-hand appliances that came with it are off the table. The report values the construction cost of the building, and picks up only the dishwasher and split system she buys and installs herself, each with its own effective life. Her accountant enters the first-year figure in her tax return as a deduction against the rent she received. The same document keeps working for as long as she owns the property, with a fresh figure for every year, and the surveyor's fee is itself deductible.
Not to be confused with
- Depreciation
- depreciation is the deduction itself; the schedule is the document that calculates it
- Asset register
- an asset register tracks what a business owns; a schedule works out the tax claim
Frequently asked questions
How does a depreciation schedule work?
A quantity surveyor or accountant lists every depreciating item, its cost and its effective life, then calculates the deduction for each year you own it. You give the schedule to whoever prepares your tax return, and the same document is used year after year until the assets are fully written off.
Who prepares a depreciation schedule?
For a rental property it is usually a qualified quantity surveyor, because estimating historical construction costs is their specialty rather than an accountant's. For business assets your accountant or bookkeeper can build the schedule from purchase invoices, since the cost of each item is already known.
Is a depreciation schedule tax deductible?
The fee for preparing a schedule is generally deductible as a cost of managing your tax affairs, in the year you pay it. That is separate from the depreciation the schedule lets you claim. Confirm the treatment with your accountant, because it depends on how the property or asset is used.
Do I need a depreciation schedule for an older property?
Often yes, but the benefit is usually smaller. Older buildings may fall outside the capital works period, and second-hand plant and equipment in an established residential property is restricted. Many surveyors will estimate the likely claim before you commit, so you can see whether it is worth ordering.
How long does a depreciation schedule last?
One schedule normally covers the full life of the assets, so you do not reorder it each year. You update it when you renovate, replace an appliance or scrap something, and your accountant adjusts the figures if the property stops being rented out.
Related terms
Broader term: Depreciation
Depreciation
Depreciation is the fall in an asset's value over time, spread across the years the asset is used so the cost can be claimed as a tax deduction.
Read definitionCapital allowances
Capital allowances are the tax deductions you can claim for the decline in value of depreciating assets, such as plant and equipment, that you hold to produce assessable income.
Read definitionWritten-down value (WDV)
Written-down value (WDV) is a depreciating asset's cost less the depreciation claimed so far, and the base for future deductions and for gains or losses on disposal.
Read definitionAsset register
An asset register is a structured record of the tangible and intangible assets a business owns, controls or leases, tracking each item's location, value, depreciation and disposal in one place.
Read definitionStraight-line depreciation
Straight-line depreciation is a method that spreads an asset's cost, less its expected salvage value, evenly over its useful life so the same amount is deducted each year.
Read definitionReducing balance depreciation
Reducing balance depreciation is a depreciation method that charges a fixed percentage of an asset's written-down value each year, so the deduction starts high and falls over time.
Read definitionGo deeper
Sources
This article is general information only and is not financial advice.