Before you could avail the benefits of depreciation claims, you must first have a better understanding of what it is and how it works.
In accountancy, it refers to the decrease in value of assets and the allocation of the cost of assets within a period of time in which the assets are used. Both aspect affects the balance sheets and the net income of a business or entity, and are important for financial reporting and tax purposes.
How it is computed varies between asset types and tax purposes. Generally, it is computed in fixed percentage, declining balance method and straight line.
Depreciation on Real Estate uses longer depreciable lives for assets like building and land improvements, and it varies by type of use as the country tax system prescribes. Australian government allows two types of allowances for depreciation claims – Plants and Equipment and building allowance. The former refers to claims to items within the building and Building allowance refers to construction costs and improvements. Both can be used to offset your assessed taxable income.
Before you can claim for compensation for depreciable property, you need to know if you qualify for any claim. You need to understand restrictions as such cut-off dates and the types of allowance. If a property is built after July 1985, the owner can claim for both Plant and equipment and Building allowance. However, if the property is built prior to this date, the owner can only apply for claim for Plant and Equipment allowance. In case your property is renovated three years ago, you can still apply for claim however, you need to consult your tax agent or ATO (Australian Tax Office) for exemptions. A professional depreciation Sydney could answer your queries and prepare depreciation reports for your claims. In most cases, the cost of your depreciation report depends on your location, size and other underlying factors that could affect your claims.
A deprecation calculator lends a helping hand in getting estimate for your depreciation claims. There are many useful and free online calculators that could help estimate your property deprecation claims.
There is also a need for your property to be inspected, as this is one requirement of ATO to determine every depreciable item on your property.
Those who are unfamiliar with the process can learn and get help. It is just a matter of knowing where to go and having better understanding of how this process could help when tax time comes.