How can you update your depreciation schedule after changing or disposing of property assets?

1 What is a depreciation schedule?

A depreciation schedule is a document that shows the value of your commercial property and its assets, and how much they depreciate each year. Depreciation is the loss of value due to age, use, or obsolescence. You can claim depreciation as a tax deduction, which reduces your taxable income and increases your cash flow. A depreciation schedule is prepared by a qualified quantity surveyor, who inspects your property and estimates the cost and life span of each asset.

2 Why do you need to update your depreciation schedule?

Whenever you make changes or disposals to your property assets, such as renovating, repairing, or improving your property, or adding, replacing, or removing any plant and equipment assets (such as furniture, appliances, or fittings), or even selling, transferring, or demolishing your property or any of its assets, it is essential to update your depreciation schedule. This is because these changes and disposals can impact the value and depreciation rate of your property and its assets, which can then affect your tax deductions. Keeping your depreciation schedule up to date will help you make sure that you are accurately claiming the correct amount of depreciation and avoiding any over- or under-claiming.

3 How do you update your depreciation schedule for changes?

If you make any changes to your property or its assets, such as renovations, repairs, or improvements, you need to update your depreciation schedule accordingly. To do this, contact your quantity surveyor and provide them with any relevant invoices, receipts, or contracts for the work done. Ask them for a revised depreciation schedule that incorporates the changes. Depending on the extent and cost of the changes, you may be able to claim an immediate deduction, a capital works deduction, or a low-value pool deduction for the new or improved assets. Your quantity surveyor can advise you on the best method for your situation.

4 How do you update your depreciation schedule for disposals?

If you dispose of any of your property or its assets, such as selling, transferring, or demolishing them, you need to update your depreciation schedule to remove the disposed assets and adjust the remaining ones. To do this, contact your quantity surveyor and provide them with any relevant documents, such as sales contracts, transfer deeds, or demolition permits. Ask for a revised depreciation schedule that excludes the disposed assets. Depending on the value and depreciation rate of the disposed assets, you may have to report a capital gain or loss, or a balancing adjustment, on your tax return. Your quantity surveyor can help you calculate and report these amounts accurately.

5 What are the benefits of updating your depreciation schedule?

Updating your depreciation schedule after changing or disposing of property assets is a simple and effective way to optimise your tax position and manage your commercial property portfolio. This can benefit you in several ways, such as maximising your tax deductions, avoiding errors or penalties, keeping track of your property's performance, and planning future investments or disposals. By knowing the accurate value and depreciation rate of your property and its assets, you can ensure that you are claiming the full amount of depreciation and are aware of the potential tax implications.