I just bought a new property, and the building value is stated in the contract. To determine capital works deduction is easy, as I have this value.
The problem is that the purchase included items like dishwasher, air conditioner, etc, which would normally be assets for which you can claim depreciation. As they are already included in purchase price, can they still be claimed under depreciation?
Someone suggested I get Depro to do a depreciation schedule on the property, but I don't understand why this is necesssary. Do you then subtract the individual asset values from the building value for CWD, and use the assets for depreciation, or how does it work?
Hi,
Am I correct in understanding that this property is pre exisiting – ie you did not build it? If this is the case then I note the following.
Depreciation and capital works deductions are based on the cost of the items. Depreciable assets are based on the price that you have paid for them. Capital works are based on the original construction costs – theoretically, the vendor is required to provide this information.
Practically, a depreciation report is the way to go. It will provide you with the details for both depreciation and capital works deductions. These are generally quite cheap and without it you may be exposed to a bit more risk in an ATO audit scenario.
There are several providers of depreciation reports. I would be happy to recommend a few.
Nope, this is a new building, that's why I'm confused, as the building contract states the building value, and I did not pay for any stand-alone items, as they were included in the building contract, but values were never specified
there are different depreciation rates for different items. The Building depreciation rate is 2.5% per year for 40 years, but this only applies for the building itself and some other items, maybe kitchen etc. The other items, such as fittings and fixtures, carperts, stove, dishwasher etc are depreciated at a higher and faster rate.
In your situation the building cost probably includes a lot of these fixtures. So you should really get a depreciation report done as each item will be listed separately and this will result in higher deductions for you.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks, it's starting to make sense. What you're saying is you can claim more deductions earlier if part of the original cost was allocated to depreciating assets instead of building (CWD) at 2.5%
Now – If I already filled in my tax claim for last year, can I still change it after I already entered the whole cost under the building's Capital Works Deduction? (I did not use an accountant, did tax myself, which is probably why I'm struggling with this now…)
Yep, thats right.
You might have to amend your tax return if already lodged and you made a mistake.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Guys,
<moderator: delete advertising> I have specialised in depreciation for 14 years. Biltongboer , Terryw is correct. don't take a chance on missing something like a hot water unit, @rate?,@value?, smoke alarms etc
kind regards
GeorgeHi Biltongboer,
Never ever get the building value stated in a Puchase Contract
kind regards
George smitI would suggest getting a depreciation schedule done and then doing an amended tax return for last year. Then do this year's tax return and if you are a normal employee look at putting in the ATO's Income Tax Withholding Variation Application for 2011-2012 so that you receive the money back during the year to help you fund the investment property.
DAMProperty | DAM Accounting Services
https://www.damaccountingservices.com.au
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