Tax Depreciation & Compliance – ATO Rules, Audits & Legal Requirements

1. Does the ATO Require a Tax Depreciation Report?

Short Answer:

While not mandatory, a professionally prepared tax depreciation report is the only ATO-compliant way to claim depreciation deductions accurately.

Why an ATO-Compliant Depreciation Report is Essential:

✔ The ATO requires accurate cost estimates from a Qualified Quantity Surveyor.
✔ Self-assessed depreciation estimates may be rejected in an audit.
✔ Koste’s reports are fully compliant and audit-ready.

📌 Ensure Your Depreciation Claims Are ATO-Compliant: Order a Report

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2. What Happens If I Get Audited by the ATO?

Short Answer:

If audited, the ATO will review your tax depreciation claims to ensure they are accurate, justified, and prepared by a qualified professional.

Why Koste’s Reports Are Audit-Proof:

✅ Prepared by Chartered Quantity Surveyors (AIQS & RICS).
✅ Backed by real construction cost data, not estimates.
✅ Includes detailed asset breakdowns to justify all deductions.

📌 Protect Yourself in an ATO Audit: Get an Audit-Ready Report

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3. Can I Be Penalised for Incorrect Depreciation Claims?

Short Answer:

Yes. Claiming incorrect or exaggerated depreciation may result in ATO penalties, fines, or required tax repayments.

How to Avoid ATO Penalties:

✔ Ensure all depreciation is calculated using real construction costs.
✔ Use a Chartered Quantity Surveyor, not generic cost guides.
✔ Keep depreciation reports up to date when property improvements are made.

📌 Ensure Your Claims Are 100% ATO-Compliant: Speak to an Expert

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4. What ATO Rules Apply to Tax Depreciation for Second-Hand Properties?

Short Answer:

Since 2017, the ATO has restricted depreciation claims on second-hand Plant & Equipment (Division 40) for residential properties.

What Can Still Be Claimed?

✅ Capital Works (Division 43) – Any structural improvements made after 16 Sept 1987.
✅ Newly Purchased Assets – If you install new appliances or fittings, they can be claimed.
✅ Commercial & Mixed-Use Properties – No restrictions on second-hand asset claims.

📌 Check What You Can Claim on a Second-Hand Property: Request an Assessment

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5. Can I Claim Depreciation If I Have a Self-Managed Super Fund (SMSF)?

Short Answer:

Yes, but SMSFs have specific ATO compliance rules that investors need to follow.

Key Tax Depreciation Rules for SMSFs:

✔ Only income-producing assets qualify for depreciation.
✔ Trust structures within an SMSF may affect tax benefits.
✔ A Quantity Surveyor report ensures compliance with SMSF regulations.

📌 Ensure Your SMSF Depreciation Claims Are Valid: Get a Compliance Check

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6. What Records Do I Need to Keep for ATO Compliance?

Short Answer:

To support your tax depreciation claims, the ATO requires detailed records of property ownership, improvements, and depreciation reports.

Essential Documents for ATO Compliance:

✅ Tax Depreciation Schedule – Prepared by a Qualified Quantity Surveyor.
✅ Receipts for Any Renovations or Asset Purchases.
✅ Rental Income & Property Expenses for Each Financial Year.

📌 Need Help Organising Your Tax Depreciation Records? Book a Consultation

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7. How Often Should I Update My Depreciation Report?

Short Answer:

It’s recommended to update your tax depreciation schedule when:
✅ You complete renovations, fit-outs, or improvements.
✅ Your investment strategy changes (e.g., switching to short-term rentals).
✅ You purchase a new commercial or investment property.

📌 Get an Updated Depreciation Schedule: Request a Quote