borrowing expense and depreciation cost on myTax...

Professional advices and comments are greatly appreciated!! So desperate to know the answers of these fundamental questions.

I’m trying to complete my return by myself this time, using myTax (which is heavily promoted by ATO), it’s good to do it myself and have some understanding of the basic tax knowledge.

I’ve got two questions here while I’m completing the return

1) I’ve got my depreciation schedule done by a reliable depreciator company, but I just cannot find where to add the figures on myTax online, ATO is offering an online tool to calculate depreciation by asking for a lot of details of each item, I thought after getting a depreciation schedule from a renowned depreciator, I can just put in the total figure in my return, didn’t expect to give a list of every item in my property, and the date of purchase, and the cost base, as well as to understand of Low value pool, etc…if I need to add each item by myself, what’s the point of getting a depreciation schedule?

Property I bought is an old unit, some reno done by the previous owner but not sure when, I guess the depreciator just use their own knowledge to come up with the cost base of each item, say a stove is $2000, rangehood for $500, etc, but there are no receipts for any of them of course. I mean their prices should just be included in the sale price of the property when I purchase it.

Do tax agents have different software to fill in the depreciation and LVP? Or do they need to put down every single item? If ATO is asking for proof, what should I provide? Is the depreciation schedule enough?

2) ATO website says common mistake when claiming borrowing expense is that people put all the expense in their first year, when it’s over $100, it should be spread out….oh well…banks charge so much to setup a loan nowadays, plus there is annual loan package cost, government charges so much on searches as well….my one all added up are about $800, so am I supposed to divide this cost to the loan term?? This method looks ridiculous to me, what about the annual loan package cost about $400? I thought it can be deducted on yearly base, as it’s the cost to maintain this IP loan only, no other personal cost attach to it!!

Any professional advice would be great!!



Thank you so much in advance!

 

...

Get an accountant to do this for you

 

My professional advice would be to get a qualified accountant to do it properly.

 

Borrowing costs are generally deductible over 5 years, but they must be apportioned in the first year because it won't be a full year of ownership.

 

A Depreciation Schedule will give you the estimated historical cost of any building work (if applicable) and an opening value of the Assets. They are a starting point and often the tricky bit. Doing the calcs after that is the easy part. Most accountants will then take those opening figures and put them into their own software.
As others mentioned, once you start getting rental properties, it's time to also get an accountant.

 

it is why i think it is a waste of time doing it yourself

"Borrowing expenses are those directly incurred in taking out a loan for the property. If your total borrowing expenses exceed $100, they must be apportioned over a period of five years. However it is considered that the annual package fee for your investment loan is not a borrowing expense, instead we consider the fee to be a bank charge fully deductible under section 8-1 of the ITAA 1997 in the year it's incurred."

as a property investor you will also have questions that arise over time

1. i'm looking at refinancing the loan. any strategies you can suggest ?
2. do you think these repairs will be deductible ? or do I need to capitalise them ?
3. time for a new property. what structure might be best ?

left to your own devices you wont be able to answer those questions yourself.

 

And when the oven is replaced next year will you maximise deductions ? The new over would be depreciated but what do you do with the old one ? Can it be written off ?
Which depreciation method should I use ?
Where do I claim the fee paid to Depreciator ?
Did you miss the $8pm bank fee on the equity release loan and the $8 pm for the loan ?

One of the most common questions I get relates to when to claim deductions. Yes the property insurance may have been paid on 20th June but it settles on 28th July...When is it deductible ? What about the interest on the deposit ? .........

 

You don't have to use the ATO's "depreciation and capital allowances tool" and can instead enter the relevant amounts from the depreciation schedule into the "Total capital allowances – manually calculated" and "Total capital works – manually calculated" fields. The low value pool deduction is not entered with the other rental property amounts and instead has its own label under the general deductions section.

 

Thank you so much Daniel! This is what I'm going to do with my return. I think that makes sense after having paid for a schedule....
With Low value pool though, if I choose that under general deduction section, then it doesn't ask for a figure manually (in which case I can just key in the figure from my depreciation schedule), instead it asks to list every items again (calculating purchase time, etc), similar to if I were to work out every item for Capital allowance depreciation.
any ideas how to put LVP through?
Thanks again for your advice!

 

My Tax allows a user to enter a unlimited number of entries. Dont click the blue hyperlink for depreciation deductions - It will require item by item. A waste of time.. Use the manual mtd and you can add a single line item for the depreciation and another for the cap allowance.

 

Off topic- we have just purchased an IP, planning to get depreciation report after we finish the Reno- do we also need one pre Reno or not?

 

depends on what you will be doing - perhaps it would be worthwhile.

 

If you are doing the reno as soon as you get the keys, you won't be able to claim the disposal value of any Assets you toss out. Does it need a reno immediately?

 

yeah its pretty bad. Thinking will leave heater/HWS until tenants are in though- until they break down.
Also the only chance we will get to do things like floor sanding, kitchen and bathroom replacement as will be too hard with tenants in there. We have been provided access during settlement period to complete renovations.

 

Sometimes you have to bite the bullet and do stuff. So you will have the costs for the work you do. Then it's just a matter of putting values on the existing Assets: heater, hot water etc.