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Deprecation schedule

Discussion in 'Accounting & Tax' started by the world is your oyster, 4th Jun, 2016.

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  1. the world is your oyster

    the world is your oyster Well-Known Member

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    hi . I was asked by cousin today and didn't know the answer so thought I would see if anyone else knew the answe

    Problem - he has a property that was his ppor then moved in with his gf and rented it out for a 6 month lease and has recently moved back it to the property !

    Q - can he and is it worth getting a deprecation schedule as the property was only leased for 6 months ( and now living in there again) ?
    Would he be able to get 50% of the first years deprecation at worse ?

    Thanks
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes he should be able to claim depreciation on that while he was absent. Worth considering but how much he would get back would depend on the age of the property.
     
  3. the world is your oyster

    the world is your oyster Well-Known Member

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    Thanks terry

    The property is only 3!years old so should be able to clam a bit . Would you think he would able to claim the whole 1st years ?
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    He could only claim the time while it was rented.

    If that new then there would be fixtures and fittings to claim as well as building works.
     
  5. kierank

    kierank Well-Known Member

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    ... and the building allowance is 2.5% of the construction costs. So, for a $100k build, one can claim in this case, 50% of $2,500; for a $200k build, one can claim in this case, 50% of $5,000. Should be worth it on this alone.

    Plus it is a non-cash expense. That is, no money out of your pocket.

    The question I have is:- what does one do when you sell this property. I assume the 6-year rule kicks in and the property remains CGT free and hence, no need to remember the depreciation amounts. I am not an accountant/tax expert. Is this correct?
     
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  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Good point Keirank. a building cost is likely to be much higher than $100k too.

    Yes, if there is a CGT exemption then no need to increase the cost based.
     
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  7. marty998

    marty998 Well-Known Member

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    Not to nitpick.... but don't you decrease your cost base when claiming capital allowances? Thus increasing your capital gain (in the absence of aforementioned exemptions)?

    (I may or may not be tired and hungover writing this).
     
  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Sorry I should have said 'decrease'.

    But if a property is exempt it wouldn't matter what the cost base was.
    ps. You can nitpick all you want.
     
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  9. BMT Tax Depreciation

    BMT Tax Depreciation Chris Business Member

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    From the scenario you describe, it's probably beneficial, especially given the recent build date. If this all occurred in the first financial year of his ownership then all the more so: he'd have a number of assets that would give him an instant write-off, and others that would have accelerated deductions due to being in the low-value pool (even more so if he left furnishings there!). Due to these factors, a pro-rata first partial financial year is often surprisingly high. That said, the timeline of the events is also an important factor. When did he buy? When did he move out? When did he move back in? If this mostly happened within a single financial year, I'd estimate easily a few thousand dollars in deductions in most cases (again, given the age of the property).

    (As an aside, in one instance through immediate write-off I've seen about $2000 in depreciation claimed in just two days after a settlement date of 28/6, and that was a new-but-basic townhouse. It won't happen every time but it can happen.)

    As has been detailed elsewhere, it's worth keeping in mind that in most cases, unless you're flipping a property and don't get a CGT discount, the benefit through claiming depreciation in increased cash flow almost always outweighs the drawback of the increase in CGT, though of course he should check with his tax agent. If he's CGT-exempt, then all the better.
     
    Last edited: 7th Jun, 2016
  10. the world is your oyster

    the world is your oyster Well-Known Member

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    Thanks guys

    I have passed on the info to him

    Thanks a lot how much do use charge for a schedule ?