Hi Guys,
After other investors input, is claiming depreciation worth the hassle for older properties?
Is there a cut off point, in respect to age of property that you would not bother?
Should you only claim depreciation on property if you plan to hold the property for life?
Should you claim depreciation on new properties only, and what if you only intend to hold them for 5-10 years?
I have bought several IP but have yet to claim depreciation, even though i have spent money on Depreciation reports. Correct me if i am wrong, but if you claim depreciation you must reduce it off the cost base of the property when you sell it, which in return increases the amount of CGT payable.
What advantages do other investors see in depreciation?
Regards
wayne10539
If you’re not claiming depreciation you’re throwing money down the drain. Depreciation gets you a non cash deduction at your full marginal tax rate, but is only taxed at 50% of your marginal tax rate when added back due to CGT discount. Especially the capital works write off, if you don’t claim by choice, then it still reduces the cost base for CGT.
My depreciation guy has a guarantee that if he doesn’t get you back more than the cost of the report then youi get to keep and use the report for free.
Given that it is one fairly quick inspection how could it not be worth it.
I have an IP built in 1960. I have claimed over $7000 in depreciation this last three years – and for a tax deductible $660 fee.
I reckon it is a no brainer.
Simon Macks
Residential and Commercial Finance Broker
[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.
Scott (Depreciator) can probably answer this best..but for my money use those reports ;0)
“Money is a currency, like electricity and it requires momentum to make it Effective”
Online Positive Cashflow and Renovating CalculatorsThanks Guys
I was under the impression that the investment properties that i had bought were to old to be of any benefit. Obviously if Mortgage Hunter is able to claim $7000 over 3 years on a property 40+ years old, i am certaintly missing out.
I will have to look into it further with a reputable company, can be a little hard at times as they dont service country WA that well, its hard enough trying to get a property valued at moment.
Regards
wayne10539
Originally posted by wayne10539:Thanks Guys
I was under the impression that the investment properties that i had bought were to old to be of any benefit. Obviously if Mortgage Hunter is able to claim $7000 over 3 years on a property 40+ years old, i am certaintly missing out.
I will have to look into it further with a reputable company, can be a little hard at times as they dont service country WA that well, its hard enough trying to get a property valued at moment.
Regards
wayne10539
Simon Macks
Residential and Commercial Finance Broker
[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.
how does depreciation work? I have 2 IPs, and seems that I DO get tax break for depreciation. Bought new in 1999 and 2001 respectively. And isnt there building depreciation, as well as things like fridges, carpets, blinds etc? Is it a set % each your, and is it a tax offset, or do I only get 21%(my tax rate) of the depreciation amount back? I cant read the accountants statements very well.
SummerskyHi Summersky,
Depreciation is the reduction in the value of an asset, based on tax depreciation rates. It is a tax deduction, not an offset, and so reduces your taxable income. Your tax liability is calculated on your taxable income, and if you have paid more tax than what you now need to, you’ll get a refund.
The tax benefit of depreciation is the amount of depreciation claimed times your marginal tax rate, not your average tax rate. Depreciation rates are advised by the ATO, and usually range from 5% up to 40%, depending on the useful life of the asset.
The special building write off works the same as depreciation but is set at 2.5% prime cost for most buildings & other capital works.
Thanks Trajic
So I assume then that I’m not actually getting as much tax relief as I has thought, ( being on the lower tax rate). BumYeah bummer,
And many other negative geared property investors will find that their next tax return (2007) doesn’t come with such a big refund cheque, due to the reduction in marginal tax rates and increases in thresholds. Most people will now be on the 31.5% marginal tax rate. All the more reason to not invest for tax purposes alone.
Hi I found this site the other day http://www.taxshield.com.au/ I do not know anything about them except it may be worth checking out.
Wayne Skewes
Mortgage Broker
Email [email protected]
http://www.eaussie.com.au/Mortgages/Aussie_Mortgage_Adviser.asp?ContentID=852280According to the AIQS (Australian Institute of Quantity Surveyors) the ATO have also found that site and they’re not all that enamoured with it.
Most decent suppliers of Depreciation Schedules will make sure it’s worth commissioning a Schedule before going ahead with it.
Wayne, if your properties are in regional areas and they were built pre 85, there are a couple of things you can do.
1. Under the self assessment provisions, you can estimate the value of Assets/fixtures and fittings e.g. stove, carpet, air con. (What you cannot do is estimate the cost of any building work.) The value you ascribe to these Assets is essentially their written down second hand value i.e. what that stove is worth as a second hand item. You just take these values to your accountant, and they’ll know what to do with them.
2. We can give you a checklist, you can photograph the items, and we’ll value them and put them in a report. It’s quite acceptable to do this with Assets/fixtures and fittings. We charge $149 (tax deductible) for this. This option is perfect for older, regional properties.In a property with floor coverings, a couple of fans, some blinds, a stove etc, there could easily be $1,000+ in depreciation in the first year. You might as well claim it. And any depreciation you claim on the Assets doesn’t come into CGT calculations.
Scott
PS Thanks Simon and Barry.
Tax Depreciation Schedules
Australia wide service
1300 660033
[email protected]
http://www.depreciator.com.auDepreciator
Thanks for the info, am i able to claim depreciation on my properties for previous years not claimed? I am currently settling on a IP in December 06, which i have had for 2 years, am i able to claim depreciation on this for financial years 06 and 07 even though it is going through settlement?
What would my options for depreciation of the building be, does this have to be performed by someone qualified to be able to claim?
I would also appreciate if you could email me the check list.
Thanks
Wayne
The ATO will allow you to amend your tax returns back four years – so the answer is yes, you can back claim depreciation for the years you mentioned.
Simon Macks
Residential and Commercial Finance Broker
[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.
Yep, estimating the cost of the building is where particular expertise is required.
Give me a call and we’ll have a chat about the properties and work something out – there’s no charge for a chat obviously.
ScottTax Depreciation Schedules
Australia wide service
1300 660033
[email protected]
http://www.depreciator.com.auThanks Mortgage Hunter & Depreciator
Simon i have not completed my tax return for FYE 06, am i able to claim the depreciation over the last 4 years even if the properties had been sold in the FYE 06?
Scott, i will give you a call shortly.
Regards
Wayne
Originally posted by wayne10539:Thanks Mortgage Hunter & Depreciator
Simon i have not completed my tax return for FYE 06, am i able to claim the depreciation over the last 4 years even if the properties had been sold in the FYE 06?
Yep.
Simon Macks
Residential and Commercial Finance Broker
[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.
You must be logged in to reply to this topic. If you don't have an account, you can register here.
