Though an important tool, a tax depreciation report isn't popular among many property owners in Australia. Some have no idea of its existence, while others do not understand its usefulness. A tax depreciation report is essential if you want to make the most out of your tax returns.
When it comes to tax deductions, your depreciations come second after loan interests. That makes the tax depreciation report a vital document for every property owner. Read on to learn what a tax depreciation report is all about.
How Do You Define Tax Depreciation?
It is vital to understand how property tax depreciation is related to tax depreciation. As the name suggests, property tax depreciation is a term used on properties that have lost value over time. It happens when a structure and the items therein begin to deteriorate. If you run your business within your property, you qualify for tax deductions based on the depreciation value given by the tax department.
Tax deductions are further broken into two. The first category is plant and equipment deductions and the second one is capital works deductions. The first category refers to the property's depreciation value, and this includes any renovations, additional structures, and extensions you may have done over the years. The latter focuses on the detachable structures as well as fittings in the property, such as the air conditioners and carpets.
A tax depreciation report indicates all the tax deductions you are entitled to. To claim these deductions, you must be fully aware of the current property value, including the fixtures and fittings in it. The tax depreciation report will help you know how much you should claim. Since this is a technical task, you will need the services of a quantity surveyor to inspect your property and provide you with the exact values.
What Are the Benefits of Getting the Depreciation Report?
There is a lot you can gain from this vital tool. But the two major ones are:
- If you compare other deductions that apply to your property, depreciation costs are one-off. Therefore, you can make the depreciation claims at no cost.
- Your cash flow can significantly improve by thousands of dollars when the tax on your property goes down.
What Should You Do After Receiving the Depreciation Report?
Once the quantity surveyor is done with the full tax depreciation report, they will hand it to you. You will then need to take the report to your accountant, who submits it to the tax department together with your yearly tax returns.
A tax depreciation report can save you thousands of taxable cash on your property. If you are unsure of the process, consult a tax accountant to get further details about the report.
