The situation

Asset Reports completed a Tax Depreciation Schedule for a tax accountant, as his own rental property. As always, Asset Reports prepared the schedule in an accountant-ready format, easily incorporated in the property owner’s annual tax return. The rental property was brand new, and the accountant was preparing his tax return for the end of the financial year, including the attributable depreciation associated with his rental property.

Our client rang to seek clarification on the difference in the first year depreciation value he calculated on the property, compared to the depreciation value that
Asset Reports calculated.

Where we helped

Asset Reports’ core business is understanding the myriad rules and regulations set out by the ATO for calculating property-related depreciation. The client was a highly proficient, experienced tax accountant, although not a property specialist, and sought Asset Reports advice to clarify the calculated differences.

Our client expected to apply a single depreciation rate of 2.5% p.a. (40 years life) across the entire cost of the property. The ATO allows a 2.5% depreciation rate for the building structure, but allows depreciation rates up to 100% (ie 1 year life) for other selected areas of the property.

By applying a single 2.5% on the entire property, our client calculated a first year depreciation rate of ~$6,000. This is significantly less than the actual deductible value allowed by the ATO.

The real kicker

Asset Reports applied the many various depreciation rates allowed by the ATO for property-related depreciation across the various asset sub-classes. By doing this, Asset Reports enabled accelerated depreciation of the non-structural areas of the property, realising a total first year tax deduction worth more than ~100% of our client’s own calculation.

Asset Reports calculated first year deductions: ~$13,000                compared to     Client calculated first year deductions: ~$6,000

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