A tax depreciation schedule may help you and your tax adviser assess property-related deductions, but strata ownership can make property boundaries and assets less straightforward. This guide explains what to check about your lot, common property, body corporate assets and previous improvements before relying on a schedule.
What is a tax depreciation schedule for a strata investment property?
A tax depreciation schedule is a report you may provide to your registered tax adviser when reviewing the tax treatment of an investment property.
The report may identify building elements, fixtures, fittings or improvements for consideration. However, the tax treatment of each item depends on current tax rules and your circumstances. The information in this article does not establish applicable depreciation rates, methods, timeframes, thresholds or eligibility requirements.
A schedule does not replace tax advice. Ask a registered tax adviser what evidence they need and which amounts, if any, can be included in your tax return.
If you are considering buying into a body corporate property, review the scheme information before settlement. The body corporate certificate, survey plan, community management statement and body corporate records can help you understand the property you are buying. See our guide to buying into a strata property.
What parts of a strata property might a schedule cover?
The possible scope depends on the property, the report provider and the tax advice you receive. It may be relevant to:
- the area within your lot
- improvements made to your lot
- fixtures or other assets associated with the lot
- shared areas or assets, where their treatment can be established.
A strata property includes individually owned lots and common property. The body corporate is made up of the owners, and its role includes administering common property and body corporate assets for the benefit of owners.
Items connected with the building may belong to your lot or to common property. The survey plan identifies the boundaries between them, while the body corporate may hold records of assets and authorised improvements.
For background, read what a body corporate is.
Can common-property costs or assets be included?
Common-property responsibility and income-tax treatment are separate questions.
The body corporate generally manages and controls common property and body corporate assets, while owners may have separate responsibilities for their lots. The registered survey plan and the regulation module help determine maintenance responsibilities.
That alone does not confirm that a common-property cost or asset can be included in your tax depreciation schedule. Ask your registered tax adviser to confirm the treatment and any required apportionment.
Check the body corporate records, asset register and financial information where relevant. You can request records in writing, and a fee may apply.
Can you claim depreciation for renovations completed by a previous owner?
Renovations completed by a previous owner may not be claimed in the same way as work you arranged yourself. The answer depends on current tax rules, the work completed, the relevant records and your circumstances.
Start by checking the improvements register, seller information, invoices and any available body corporate records. An owner may make an improvement to common property for the benefit of their lot, and the seller should provide information about authorised improvements before settlement.
Your registered tax adviser can then confirm whether the renovation is relevant to your tax return.
What should you check before relying on a depreciation schedule?
Before ordering or using a schedule, confirm:
- which area is inside your lot and which is common property
- which plan of subdivision and regulation module apply
- whether the item is a body corporate asset, a lot asset or an improvement
- what records, invoices and plans are available
- whether the report provider has considered the property’s particular ownership arrangements
- whether your registered tax adviser accepts the report and can use it for your circumstances.
Maintenance responsibilities can also help you understand how the property is divided, but maintenance responsibility does not automatically determine income-tax treatment. Read our body corporate maintenance factsheet for more information.
Consider a tax depreciation schedule alongside the scheme documents and advice from a registered tax adviser. The schedule does not automatically confirm a deduction. For body corporate records or scheme information, contact our team at reception@stratacare.com.au.
