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  • Profile photo of ijcijc
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    @ijc
    Join Date: 2002
    Post Count: 28

    Hello- Is it a 'legal requirement' that a Quantity Surveyor prepare the depreciation schedules for the building and contents of a neg geared investment property? I was advised by one accountant that a registered builder could do these, and that would be acceptable to the ATO, yet my new accountant insisits they can only be done by a Q.Surveyor. An informed opinion would be greatly appreciated. Thanks.

    Profile photo of fredo_4305fredo_4305
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    @fredo_4305
    Join Date: 2009
    Post Count: 336

    Im not to sure myself, however a QS is only 500-600 dollars and is of course a tax deduction itself…

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,190

    I don't think it is a requirement. You can claim based on the costs where you know them, if you need to rely on an estimate, then only a QS is qualified to give this.

    I agree with Fredo though – you will end up with the QS finding more items than you had thought of and getting a higher depreciation allowance than if you did it by yourself.

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of Mr5o1Mr5o1
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    @mr5o1
    Join Date: 2010
    Post Count: 107

    http://www.ato.gov.au/individuals/content.asp?doc=/content/00183243.htm
    see the “where do you get the information” section, down the bottom.

    Quote:
    If you purchased the property and do not have a record of the construction costs – for example, where the vendor did not provide them – you will need to obtain this information from an appropriately qualified person. This could be a:
    -quantity surveyor
    -clerk of works, such as a project organiser for major building projects
    -supervising architect who approves payments at project stages
    -builder experienced in estimating construction costs of similar building projects.

    I totally agree with the others.. dont mess around getting an estimate from a builder or some such.. talk to a quantity surveyor.

    Profile photo of Scott No MatesScott No Mates
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    @scott-no-mates
    Join Date: 2005
    Post Count: 3,850

    A builder can only provide you with a break up of the cost, whether it be the replacement cost if the work was done today or the initial /replacement cost years back when the work was done.

    I would recommend using a QS.

    Profile photo of petronapetrona
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    @petrona
    Join Date: 2008
    Post Count: 35

    Definitely go for a QS.  We have used Australian Tax Depreciation Services for each of our four properties, and I can strongly recommend them. (And no I'm not an agent for them or a relative!)  They come out and do a site visit plus the schedule for $495, and are just excellent in terms of customer service etc.

    Profile photo of ijcijc
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    @ijc
    Join Date: 2002
    Post Count: 28

    Thanks 'posters' for your input- I really appreciate the 'helping hand'.

    Profile photo of jacqui_03jacqui_03
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    @jacqui_03
    Join Date: 2010
    Post Count: 142

    Can anyone tell me the easiest method to work out depreciation on a property built after 1987? I am trying to find positive cashflow properties however I want to know if there is a way to estimate what the depreciation would be in year 1 etc prior to getting a Q.S? Am I best to look at newly built houses (house and land packages) or just established houses built after 1987 – Is there a big difference in the depreciation I could claim?

    Cheers

    Jac

    Profile photo of Scott No MatesScott No Mates
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    @scott-no-mates
    Join Date: 2005
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    2.5% per annum, need to estimate construction/replacement cost of house and age of property.

    Profile photo of jacqui_03jacqui_03
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    @jacqui_03
    Join Date: 2010
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    I am aware of the rate of 2.5% p.a for 40 years if the property was built after 1987 – however just curious if there is a basic formula regular property investors go by when crunching the numbers on a potential IP? Thanks for your help scott no mates – I just dont think I would have any idea how to estimate construction/replacement costs on a property without something to go off.

    Profile photo of ijcijc
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    @ijc
    Join Date: 2002
    Post Count: 28

    Can anyone advise me of the building depreciation rate for a property built before 1987? Thanks

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,190

    Nil, generally, I beleive. But I think there was a short period where it was 4%

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of Mr5o1Mr5o1
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    @mr5o1
    Join Date: 2010
    Post Count: 107
    jacqui_03 wrote:
    Am I best to look at newly built houses (house and land packages) or just established houses built after 1987 – Is there a big difference in the depreciation I could claim?

    You will always get more depreciation on a more recently constructed house. even when using the straight-line method, (usually dim val is used) plant and equipment is written off over a shorter period, resulting in larger deductions in the first years of the depreciation schedule.

    Anything pre july 85 is not depreciable. july 85 to sept 87 capital works is depreciable over 25 years.. so if it was constructed in august 87 you’ll get 4% for the next couple of years.. the 25 years will expire in 2012.

    There’s not really an effective way to estimate depreciation, because it can vary considerably. That said, because depreciation is a non-cash expense, it will only effect your cashflow through your tax advantage. So say your in a 30% tax bracket (after rental losses are applied) and you estimate $6000 for depreciation, but the actual cost turns out to be $7000 – your cashflow projection would only be out by $300 for the year.

    Profile photo of ijcijc
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    @ijc
    Join Date: 2002
    Post Count: 28

    Am I understanding correctly?- An investment property originally built for resi purposes in 1986 is depreciable over 25 years @ 4% and let's say a pergola was added as a capital improvement in 1990 that would depreciate at 2.5% over 40 years. Also, with depreciable items inside the residence like carpets, blinds etc. are they costs that must be estimated by a QS, as is the case with the building? Just drilling down on this as I have an investment property I've had for 6 years where I may have done the incorrect thing and I'm a bit worried about it now re: ATO requirements :) Your advice would be appreciated.

    Profile photo of Neil RichardsonNeil Richardson
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    @neil-richardson
    Join Date: 2010
    Post Count: 11

    IJC

    You have your assumptions correct, in regards to the 2.5% and the 4%.

    The 4% properties used to be very popular, however their usefullness has now almost expired as most will cease to be able to be claimed this year or the next or 2012.

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