Good morning all;
What effective life can I use for Declining Value of External Painting?
What are the advantages of Prime Cost vs Diminishing Value?
If I paint just 1 or 2 rooms can I claim it as a deduction, rather than
Declining Value?Regards
Darylthis is a grey area of tax law if your paint the rooms straight after purchasing the property it is a capital improvement as you are improving the property from the state that you purchased the house at. If the paint job is required because of wear and tear from a tentant you should be able to justify it is a repair. If you paint the entire house this will be deemed as an improvement. If you paint it after purchasing the house it is an improvement. For information on this goto
http://www.ato.gov.au/content/downloads/NAT1729-06.pdf
http://www.ato.gov.au/individuals/content.asp?doc=/content/42782.htm&page=13
if in doubt ring the tax department on
Personal tax enquiries – 13 28 61
they are very helpful to deal with
or check with your accountant as the tax law on depreciation is not black and white.prime life depreciation is the cost of the item / the effective years of life. it has the advantage of being fairly simple to work out its draw back is that the depreciation is the same over the life of the item for each year.
Diminishing depreciation is calculated by dividing 150% by the number of years of life to give you a yearly depreciation percentage however this will chabge to 200% / effective years life.
this is covered on page 15 of nat1729-06.pdf . THe advantage of diminishing is that you get greater depreciation at the beginning and as time goes by this amount diminishes by the amount of depreciation each year coming off the value of the item. This is particularly useful for cars as this is how cars depreciate in real life. Also you might what to research STS on the tax web site as there is also a method of depreciation know as a low value pool and also look at the minimum amount where an instant deduction occurs I think it is $300 if not part of a set but check on the ato web site.effective life after 1 july 2006
http://law.ato.gov.au/pdf/tr06-005.pdf
effective life item purchased before
1 july 2006
http://law.ato.gov.au/pbrdocs/tr200018_cv.htmThanks Duckster;
I presume that it preferable to transfer items to a Low Value Pool as soon as the Opening value drops to < $1000 due to the favourable rate?
Am I also able to write off items that have an opening value of < $300.
Regards
DarylNo if item has depreciated down to $300. only if original cost is <$300 .
Taxpayer cannot acquire one or more assets identical in the same income year if the total cost is over $300 like two lamp shades at $290 as an example.
exception to this is Software it cannot be written off straight away even if under $300…Private use has to be apportioned pro rata also.
Once an item is declared as diminishing it stays as diminishing
once an item is declared as prime life it stays prime life.,To use a low value pool may not be available as there are eligibility requirements to enter sts and you have to lodge a form to the tax office. sts applies to all businesses (ie companies, fixed trusts, non -fixed trusts, partnerships and sole proprieters) and turnover less than one million dollars.
good idea to check with ato if you are eligible to enter simplied tax system as a rental property owner.
A quantity surveyor can assess your whole property for a depreciation schedule that you just give to tax agent/accountant .Opening value cannot be written off immediately if it has declined to $300 from a previous year of depreciation. . If it cost less than $300 to purchase item then yes it can be written off immediately.
Also prime cost items can’t be added to a low value pool
Darryl,
To answer your initial question, painting is regarded as a building item. As such, it is depreciable at 2.5%pa.
For you to claim paining as a ‘expense’ i.e. a repair, you need to have been renting the place out for a while. The ATO don’t say how long, you just have to be sensible. If you’ve been renting a place out for, say, 9 months and you paint the entire inside of the house and claim it as a repair, your pushing it. If you were to claim repainting the hallway and a bedroom, you would be okay. Similarly, if you were to paint the outside of the place after 9 months and claim it as a repair, you’d be pretty game.In answer to this:
I presume that it preferable to transfer items to a Low Value Pool as soon as the Opening value drops to < $1000 due to the favourable rate?Once the written down value of an item drops below $1,000, yes it can go into the LVP and get depreciated at 37.5%
Scott
Tax Depreciation Schedules
Australia wide service
1300 660033
[email protected]
http://www.depreciator.com.au
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