Depreciation on strata property confuses people because two separate claims run at once, and they belong to different parties.
An individual lot owner claims on their own lot. The body corporate holds the common property. Plant and equipment sitting in common areas, lifts, pool pumps, fire panels, gym equipment, carpet in the lobby, is owned collectively, and each owner’s entitlement to a share of that depreciation is worked out against their lot entitlement.
Most depreciation schedules sold to investors deal with the first claim and treat the second as a footnote. For a scheme with substantial common plant, the second one is often the larger number.
The two categories
- Plant and equipment. Assets with a limited effective life. Lift motors, pumps, air conditioning, fire and security systems, floor coverings, blinds, gym and pool equipment.
- Capital works. The structure itself and fixed improvements. Concrete, brickwork, tiling, and the built elements of any renovation.
Under Australian Taxation Office rules, the value of a capital asset reduces across its effective life, and that reduction is deductible. A schedule sets out the amounts, year by year, so owners and their accountants are not estimating.
What a schedule covers
Schedules prepared for a scheme run a forty year capital works allowance alongside a plant and equipment schedule, apportioned to lots where that applies. It is a one off document. Once prepared it is used every year until the asset base changes materially.
A schedule is worth revisiting after significant capital expenditure. A lift replacement, a re-roof or a full common area refurbishment all change the position, and a schedule that predates the work understates what is available.
Where this sits against a sinking fund forecast
Both documents look at the same assets from opposite directions. A sinking fund forecast projects what the scheme will have to spend replacing them. A depreciation schedule sets out what can be deducted as they decline in value. Committees holding both have a clearer picture of the asset base than those holding one.
Getting one prepared
Seymour Consultants prepares tax depreciation schedules for bodies corporate and strata schemes across Queensland and northern New South Wales. Our quantity surveyors are members of the Australian Institute of Quantity Surveyors. Call 07 5573 4011.
