Hi,
The split system heater/cooler in our rental property has carked it. The airconditioning guy has recommended a new system as the fuzion has gone. The unit is about 4.5years old. I spoke to my insurance company and they will reimburse me for the fuzion ($1700 less $200 excess=$1500) I will pay the difference on the new unit (a slighty bigger one) which is $2500 in total.
My question is will my accountant depreciate the total cost or will he have to take into account the $1500 I will be receiving from my insurance company.
I also just replaced the old electric hws to a instant gas hot water ($2000) and received a $500 rebate from the government as an incentive – am I required to declare that?Thanks Maree
Two schools of thought: 1: you paid $4500 for the ac unit and depreciate that over its life, declare the insurance payout as income and write off the old unit or 2: claim depreciation on the net cost of replacement and write off the old unit.
Likewise with the hws – if you paid $1500 after the rebate, is there really a difference between this rebate and a rebate that a purchaser of an IP might get on an off the plan purchase? ie you can't depreciate an item for more than it has cost.The full amount would be depreciated, and the insurance money received would be recorded as income. Also, you can write off any undepreciated balance of the old air conditioner.
Great – thanks. That makes sense
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