Depreciation report for renovation

Discussion in 'Accounting & Tax' started by tattoo, 16th Nov, 2020.

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  1. tattoo

    tattoo Well-Known Member

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    BMT did a depreciation schedule for investment poperty about 4 years ago and have been using that in tax returns.
    Its recommended that you do a depreciation schedule before and after renovations. For the before part, should I get another report done or would I be able to use the current report ?
    That has itemisation, schedule of value over the years, would allow scrap value to be worked out.
    Haven't done any signficant upgrades or repairs to the apartment
     
  2. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    It may be wise to consult BMT. They may update it and may need further info about any elements that are being scrapped. BMT offer excellent support services and are the best point of contact for such questions. The schedule often will NOT contain sufficient information for scrapping (other than a demolition in full, which probably also should have tax advice).
     
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  3. BMT Tax Depreciation

    BMT Tax Depreciation Chris Business Member

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    The best thing to do is get in touch with us. We'll have the data and report for your property pre-renovation and can guide you from there. The answer to your questions depends on a couple of factors and--much to my despair--we don't yet have a PropertyChat nickname field in our contact database.

    But, for the most part, we will tinker with your original schedule to create a post-renovation version that you can continue to use while you rent the property out. If you're eligible for scrapping and if you have scrapping deductions, we can provide you with a scrapping report too.

    If your eligible scrap consists only of plant and equipment items, you can work that out yourself, but if it also contains capital works allowance, we'll need to estimate how much you've removed from the property.

    I'm confused about your last sentence because you're talking about renovations and scrapping but then say you haven't made any significant upgrades. Could you please clarify what you have actually done or are planning to do? Feel free to message me with the address so I can look it up in our database.
     
  4. tattoo

    tattoo Well-Known Member

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    Thanks both
    To clarify, no significant upgrades has been done to the place since the depreciation schedule few years back. The renovations are planned some time next year. Scrapping will likely happen then (carpets, kitchen/bathroom removal etc)
    I'll msg BMT directly
     
  5. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    I will share an example based on typical client issues

    David has a BMT report that is 6 years old for his 15 year old property. He plans a new kitchen and flooring and to demo the garage and build a new GF. the whole dwelling after completion will be rented to two tenants.

    The Plant & Equipment issues are easy and shown in the schedule. But the kitchen is a element of the building. The kitchen is 15 years old and many may think its of no book value. WRONG. The $8,000 cost back in 2005 still has 25 years of 40 years to run. Scrapping could be $5,000 + adding the new kitcen, appliances etc Also the garage.... Thousands of dolalrs potentially.

    Important the QS identify whats being scrapped BEFORE work commences as there can be a bit of value in Div 43 items. The tax rules assume a life of 40 years but in reality its often less.
     
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  6. seadogg14

    seadogg14 Well-Known Member

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    Hi Chris,
    Just about to buy a investment property ,Queenslander in Brisbane build in 1970.Possibly will look at a Reno down the line.Should I get a depreciation schedule done now or at the time?
     
  7. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    My advice is - always seek the advice of a QS and their opinion. Many falsely assume a older property prior to 1985 cant have capital allowances or depreciation benefits. Many QS firms tailor their fee to the limited deductions in any event.
     
  8. BMT Tax Depreciation

    BMT Tax Depreciation Chris Business Member

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    It depends.

    If you'd like to message me with the address, I can look it up. What you want is for there to have been a reasonable level of improvements since 1987. It also sounds like your renovations might not be taking place directly after purchase. You also want for the property to continue as a rental property after the renovation.
     

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