What is a depreciation report?

In Australia, a depreciation report usually has two parts:

1. A Quantity Surveyor’s Report and;
2. A Depreciation Schedule.

The Quantity Surveyor’s Report is an itemised list of items in the property, along with their estimated current values. If you know the cost of an item, you don’t need to have it estimated as you can use the actual cost, but if you’ve bought a property that was already built you will need to get an itemised list.

The itemised list will include both “plant and equipment” and “capital works”.

The Depreciation Schedule takes the values provided by the Quantity Surveyor and calculates the amount of deductible value for each item for each year. As “capital works” are deductible over 40 years, the depreciation schedule should cover 40 years. The period of time that each item needs to be depreciated over is determined by the Australia Tax Office.

The amounts listed in the Depreciation Schedule can then be used in a tax return to offset income.

A Depreciation Schedule should also take into account other rules such as “low value pools” which we’ll look at in more detail in a later post.