Depreciation is one area where the quality of advice, and the quality of the underlying system, makes a significant difference to outcomes. These questions help you have a more informed conversation with your accountant about how your depreciation is being managed.
What should I ask my accountant about depreciation at my next meeting?
Five questions worth asking:
- Are you maintaining separate tax and accounting depreciation schedules for my assets?
- What is my NTA on an accounting basis, and how does that compare to any licensing or lending thresholds I need to meet?
- Are there any assets I have written off for tax that have significant remaining accounting value or replacement cost?
- What is the expected tax impact when I dispose of my current major assets?
- Is my depreciation register being maintained in a way that supports my insurance, CAPEX planning, and borrowing conversations?
My accountant says depreciation is just a compliance matter. Is that right?
Depreciation done properly is far more than compliance. It affects your balance sheet, your borrowing capacity, your insurance coverage, your licence compliance, your CAPEX planning, and the price you can achieve if you sell the business. A purely compliance-driven approach to depreciation is leaving value on the table and, in some cases, creating risk that is entirely avoidable.
How do I know if my depreciation software is doing the right thing?
Ask it to show you both the tax WDV and the accounting carrying amount for each asset separately. If it can only show you one figure, or if the two figures are always the same, it is not maintaining parallel records correctly. Good depreciation software should handle Division 40, Division 43, Division 328 pooling, the instant asset write-off, and balancing adjustments correctly by design, not by the user having to know and manually apply each rule.