Hi
I have bought a few property but have never used depreciation schedules could some one please explain to me what they are?, can the be used on postive cash flow property?,
Thanks Rob
They are essential.
You get a report detailing what depreciation you can claim on your tax for all the fittings, furniture and even the buidling if new enough. A modern apartment can get you an awfully big refund – even if pos cashflow….
Given that my QS has a guarantee that if he doesn’t get you more than double the reports cost back in extra tax refund he wont charge I cannot see why you wouldn’t get one done on every property.
My guy is very good and covers the whole country. If anyone wants an intro then please drop me an email. Nothing in it for me except maybe a beer from him [biggrin]
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Whilst there are benefits in claiming depreciation,you also need to factor in that depreciation is deferring paying tax.When you sell you will have a reduced cost base and if you have made a profit,you will pay more CGT.Of course you may only be paying CGT on half the profit,but bear it in mind in your calculations.
Tools
You are claiming the depreciation now and it does increase the CGT assessment. But as this is halved it is better to get it now and help with cashflow.
If you sell the property in 20 years time then pay tax on 50% with 2026 dollars and take a refund today at 100% in 2006 dollars.
I know which I prefer.
If you are a buy and hold investor then CGT isn’t an issue …
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
I believe there are more benefits than not in getting a schedule done ASAP;I use Scott from this forum and http://www.depreciator.com.au .
On the other sideof the coin I have met an investor who prefers not to get a depreciation schedule done due to the reasons tools stated..however, in that time you may have had to replace items such as curtains, carpets, air-conditioning etc..its like not getting an ITWV done because you want your tax refund at the end of the year and in one lump sum..in that case you basically give the Government an Interest Free loan
“Money is a currency, like electricity and it requires momentum to make it Effective”
Online Positive Cashflow and Renovating CalculatorsLike Redwing, I use Scot from http://www.depreciator.com.au and have found his service great – we now recommend his services to all our clients
Michael Yardney
METROPOLE PROPERTIES
Publisher of Australia’s leading property e-magazine.
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FREE subscription http://www.PropertyUpdate.com.auRecently I have been using Deppro. Can anyone shed light on the benefits of changing to the previously mentioned QS supply company?
David
Gee, I’d love to answer that question David, but I’d get myself into strife.
Rob, depreciation is just another outgoing, or cost of ownership. In that respect it’s really not much different from rates, interest payments, property management fees etc.
Depreciation is described as a ‘non cash deduction’. With rates etc, you pay money out during the year, and then claim it as a deduction. With depreciation, you locked in your entitlement to claom it when you bought the property. All you do every year and go and claim that depreciation.
A Tax Depreciation Schedule is a dicument that sets out how much depreciation you can go and claim every year.
Regarding Tools’ point, it’s only depreciation claimed on the building that comes into play when calculating capital gain. The Assets (fixtures and fittings) don’t count. And in many cases, there is more depreciation in the Assets than the building.
Scott
Tax Depreciation Schedules
Australia wide service
1300 660033
[email protected]
http://www.depreciator.com.auHey Scott,
I didn’t realise the other members were talking about a local PI member. Please email me your pricing schedule & company info, as I have recently purchased another property & will be requiring a D.S. by years end.
Cheers,
[cigar]David
Hi
I just rang a quantity surveyor to get a dedepreciation schedule for my properties and she said that i’d be wasting my time cause i’ve done all the renovations myself and have the reciepts. Is this true
Thanks Rob
Under income tax laws you can claim the expected decline in value of depreciating assets in your investment property.
There are two options available:
Division 40 Commonly know as “Depreciationâ€
Division 43 “Capital Works†deductionsDivision 40
Under income tax law you can claim the expected decline in value of depreciating assets in your investment property. Your Accountant will calculate this for you. For items costing $300 or less, an immediate deduction is available. Otherwise your deduction is calculated by using the Prime cost or Diminishing Value method.
Both are based on the effective life of the asset. Your accountant will work this claim out for you.
(Further reading IT 2685, TR 2000/18)What can be depreciated?
Tax Office: “…any items that are articles within the ordinary meaning of that word”This means any item which is separate or individual and does not form part of the building structure, eg an oven would be a separate article if it is not fixed to or otherwise part of the building and if it will require replacement within a relatively short period. (Further reading TR 2004/16)
Division 43
Division 43 If your property was constructed after 18 July 1985 and/or altered, extended or structurally improved after 27 February 1992, you may be eligible to claim a “Capital works” deduction calculated as follows:Date Rate % Number of years
18/07/85 – 15/09/87 4.0 25
15/09/87 – current 2.5 40Your deduction is calculated from the day the building is first used after completion of construction, and is based on the construction expenditure or structural improvement made.
It includes:
• All fees associated with the design, survey, engineering and council approval
• Any earthworks and retaining walls
• Cost of building construction
• Cost of fencingExcluded items are the land cost and costs for landscaping and clearing/demolishing of existing structures.
WARNING: The amount you claim for decline in value of depreciating assets may be subject to a balancing charge when the property is sold. Discuss this issue with your Accountant before disposing of property.
For more information check this Tax Office Download
http://www.ato.gov.au/content/downloads/NAT1729-06.pdfFrequently asked Questions
Q: What is the difference between a repair and a capital improvement?
A: Repairs are the costs incurred in restoring the asset back to the condition it was at the time the property first became income producing. A capital improvement takes it a step further and improves the asset beyond the original condition.Q: What if I don’t know the original cost of items?
A: The Tax Office will accept estimates of values that are made by a Quantity Surveyorso that you can receive maximum tax deductions.Q: Can I claim an item for both deprecation and capital works?
A: No, you cannot “double dip” and claim an item under both Division 40 and 43.A tip, always take photographs of the property when you first acquire it – and keep them as evidence of the original condition of the property.
I hope this answers your question,
AmandaBS
http://www.propertydivas.com.au
FREE online Property Resources“It is better to be inconspicuously wealthy, than to be ostentatiously poor…”
I just rang a quantity surveyor to get a dedepreciation schedule for my properties and she said that i’d be wasting my time cause i’ve done all the renovations myself and have the reciepts. Is this trueHi Rob,
That QS could well be right. It depends in part on the extent of the renos and the age of the property.Scenario 1:
It’s a pre 85 built property. In the reno you gutted the place and ALL the fixtures and fittings are new. In this case, you would probably have receipts for everything that is depreciable and your accountant would be able to take care of it.Scenario 2:
It’s a post 85 property. You will be able to claim depreciation on the reno, and on the original building. A QS would be able to work out the construction cost of the original building. The QS would then use your receipts to add the reno costs to the Schedule.Of course, there would be many variations on the above. For example, the reno may have been only a partial reno and there may be some fixtures and fittings still in the property that were there when you bought the place. It sounds to me like you might be able to head straight to your accountant. Try and get the receipts in good order first i.e. don’t just lob with them in a shoebox. If you give me a call, I’ll tell you exactly how your accountant would like them presented. (That may save you money on accounting fees.)
Scott
Tax Depreciation Schedules
Australia wide service
1300 660033
[email protected]
http://www.depreciator.com.auHi Scott
Yes the properties I own are were built before 1985 and i have done all the renos to them the problem is for eg. A 2 bedroom unit I fully renovated ( fully air coned, built in wall robes in both rooms, new kitchen, bathroom and laundry) cost me $7000 cause i did it all myself as i’m a cabinetmaker. But would cost more if someone did it for me about ($16000) This is why a QS would be better.
Is there any way around claiming what it’s worth not what it cost me. And if not will i ever need a dedepreciation schedule if I do this to all my properties.
Thanks Rob
Rob, if you’re a tradie, talk to your accountant. Do you have a company? Maybe you can do something about invoicing for your labour. Either way, I suspect you don’t need a QS this time. There will depreciation there to claim, but you’ll have the costs.
ScottTax Depreciation Schedules
Australia wide service
1300 660033
[email protected]
http://www.depreciator.com.au
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