Deferred Depreciation Schedule

Depreciator are on the ball. Well and Truly.

I received an email that explains a NEW CGT deduction available for some property acquired after 9th May 2017.

Explained by Depreciator here :

With established property purchased after May 9 2017, the depreciation that was previously able to be claimed on the Assets can now be tallied up and when the property is sold, the total unclaimed depreciation is deducted from the capital gain to reduce the CGT payable.

To accommodate this twist, we have a new job type: a Deferred Depreciation Schedule ™.

When you consider the REDUCED costbase addback v's the reduce CGT outcome using this deferred deduction this could be a delayed but lucrative benefit. If a taxpayer is eligible.

 

Trademark...lol
Re: "the total unclaimed depreciation is deducted from the capital gain to reduce the CGT payable"
What about the balancing adjustment ie. when the property is sold part of the sale includes an amount for the assets and only the decline in value of the assets is a capital loss and not the entire original value??
Refer example 2.3...
http://www.treasury.gov.au/~/media/...y Documents/PDF/housing_tax_integrity_em.ashx

 

Yes, it's an interesting thing, Paul. And an odd thing to slip in almost as an after thought given their aim to reduce what people are claiming. It was tucked away toward the back of the draft legislation.
Scott

 

And people question the value in a QS fee !
More than ever it seems good value to me - Not less value.

 

Then is it true to say that only claimed depreciation shall be deducted from the property original purchase price for computation of the CGT?

 

No. Incorrect to assume

 

Thanks @Paul@PFI, the calculation of CGT is a complex one indeed.

 

Paul, I have an accounting question based on the above.
Using the Example 2.3 in the Exposure Draft...Client sells property for $700k that he bought for $500k. Hence capital gain is $200k. Alternatively, taking into account previously used depreciation assets, client sell for $700k less $20k vs $500k less $30k = gain $210,000 ($680k less $470k). Deduct $10k for balancing adjustment = capital gain of $200k. Isn't this the same result? If so, why do you need deferred depreciation schedule? And, with this deferred depreciation schedule won't you need a QS to come back and re-value the assets when you come to sell the property?

 

No market value isnt requirement as it requires a taxpayer to do more than is reasonable. The ATO have long adopted the view that the sale proceeds could be reduced by the notional book value of those tangible assets - The existing WDV is common. The QS report is a fair basis for this.

I'm also not confident a QS is the right person. A qualified valuer may need to assess the value of assets at handover rather than a QS who merely estimates what the original cost of an asset was. It would become a circus and costly so the approach seems reasonable. The same occurs for business sale of assets. The written down value is used to determine whether a tax profit occurs...Not value of the asset when sold.

 

So, using Example 2.3, are you saying the capital gain is $200k or $190k (ie $200k less 10k)?

 

I dont give advice on PC. Or advise on law that isnt law !!