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Depreciation - includes labour component?

Discussion in 'Accounting & Tax' started by USC, 21st Jan, 2016.

  1. USC

    USC Active Member

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    Random Q:

    We are installing a new air conditioner in an IP. When I give my accountant the receipt come tax time, does he depreciate the total amount (ie. parts + labour) or just the actual parts component?

    I ask this question because in this example, our invoice separates the two. But thinking back to another property that we installed an air conditioner in, the invoice didn't itemise and showed a total amount, which my accountant has depreciated the full amount.
     
  2. Rob G

    Rob G Well-Known Member

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    Depends upon the specific details. It might need dissecting.

    Structural alterations to the building would be capital works - 40 years

    Removal costs for the old air conditioner would be part of the balancing adjustment event cost - potentially an immediate deduction

    Installation & commissioning of new air conditioner - part of cost for depreciation
     
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  3. Vultures

    Vultures Well-Known Member

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    I give my accountant the total amount every time, and he's never asked what the labour component was in anything.

    You cannot claim depreciation on your own personal labour (eg if you renovate a property yourself), you can only depreciate amounts that you have spent - which to my (unprofessional) eye looks like labour costs are included.
     
  4. BMT Tax Depreciation

    BMT Tax Depreciation Chris Business Member

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    It's both (thankfully!).
     
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  5. BMT Tax Depreciation

    BMT Tax Depreciation Chris Business Member

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    I'll put forward a caveat, though: many people assume that if they take the cheaper option during a renovation and perform the labour themselves then they can also claim for their own labour component. That's what's known as trying to have one's cake and eat it too. You can only claim on what's been spent.
     
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  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    This is a common misconception it seems.
     
  7. USC

    USC Active Member

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    Excellent thank you all !