The depreciation schedule 043-03070030

This amount is the original cost of an asset less the total depreciation claimed to date. The term 'Opening WDV' is the written down value of the item at the beginning of the period covered by the depreciation schedule. The term 'Closing WDV' is the written down value of the item at the end of the period covered by the depreciation schedule, that is, takes into account depreciation claimed against the assets during the current period. The term often used for WDV is 'book value'.

The WDV of an asset can usually be used for Assets Test purposes but valuations may be necessary for buildings, or when the current value is clearly higher than the WDV. A licenced valuer for Services Australia can value assets like buildings or plant and equipment. A copy of the depreciation schedule should be provided to them if a valuation is required.

Depreciation cannot be claimed as an expense when the asset is being used for private purposes. Consequently, the depreciation schedule allows for the entity to specify a percentage of the time during which the asset was used for private purposes.

Any assets sold, scrapped or otherwise disposed of during the year are included in this section. This is so that depreciation is only claimed for that part of the year during which the asset was owned.

This refers to any items purchased or obtained by the business during the year. It includes both new and second-hand assets.

This is also referred to as a balancing charge. If the amount received for an asset upon its disposal is greater or lesser than it's written down value (WDV), the excess is included in assessable income for both tax and Social Security purposes. However, this income can be reduced or eliminated by offsetting it against the depreciation to be claimed for other depreciable assets on the profit and loss statement. If the amount received on disposal is less than the WDV of the asset the difference is an allowable deduction that year for both tax and Social Security purposes.

As with all one off income or expenses, the profit or loss on sale can be disregarded altogether if it is a one off and unlikely to be repeated, but that would only occur in exceptional circumstances.

Depreciation allowed by the Australian Taxation Office (ATO) is allowed as a deduction against rental income for Social Security Income Test purposes. The ATO allows depreciation of fixtures and fittings of a building or structure utilised to generate rental income under subsection 54(1) of the Income Tax Assessment Act (ITAA) 1936 and Division 42 (section 15) of the ITAA 1997. Fixtures and fittings include items such as furniture, light fittings, carpets, blinds, kitchen oven, hot water system, heaters, air conditioners and above ground pools. Depreciation is not allowed by the ATO on electrical wiring, plumbing and gas fittings, sinks, tubs and baths, garages, fences or in-ground pools.

The ATO has produced schedules of depreciation for items of equipment and these or any other equitable method of calculating depreciation will be accepted. If doubt exists the section of the ITAA under which the depreciation was claimed should be ascertained.

Depreciation is not allowed by the ATO in respect of the actual building or structure utilised to generate rental income. Although it is common for a depreciation schedule provided in respect of a rental property to claim depreciation on construction costs, this is not depreciation, but a write-off of these costs. This write-off expense can usually be readily identified as such by the percentage rate claimed in the depreciation schedule, usually 2.5% or 4%. This expense is not allowed as a deduction for Social Security Income Test purposes. Accordingly, if a depreciation schedule indicates that the expense claimed includes depreciation on construction costs, the amount claimed should be added back to the net rental profit.