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Depreciation Schedule for older property

Discussion in 'Accounting & Tax' started by JK200SX, 25th Aug, 2015.

  1. JK200SX

    JK200SX Well-Known Member

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    Will be settling on an older property in a copy of weeks. It is a house built some time pre 1960 and the only improvements noticeable seam to be:

    - new kitchen; sometime in 2013-2014
    - renovated bathroom; 2013-2014
    - newly polished floorboards?

    Is there a benefit in getting a depreciation schedule (quantity surveyors report) for the property. Haven't had one of these done for a property for a while, but I'd presume they'd cost ~$600? and would that cost potentially outweigh the depreciation that could be claimed?

    Thanks in advance!
     
  2. Depreciator

    Depreciator Moderator Staff Member

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    It will be worth it.
    Of course, you would expect me to say that.
    Send photos to a QS who does Dep Schedules and they will be able to tell you how much you might be able to claim.
     
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  3. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    My stock standard answer to the question is always the same. Ignore the age of every property and seek the opinion of a reputable Qty Surveyor who specialises in property tax schedules. They will tell you if its worth it. They are qualified to give that advice and its their business so use it. All the good ones like BMT, Depreciator etc offer a fee based on deduction values so you can be assured there will not be a cost unless there is value.

    Then when your tax accountant asks you can do one of two things:
    1. Provide them with the QS report (if BMT / Depreciator etc haven't already sent it to them / us); or
    2. Tell the accountants they advised its wasn't viable.

    One of the best lessons in the whole area of property investing is the importance of learning who the key people are - Use them. I would also try to get a great mortgage broker, lawyer and tax adviser you can call on if and when needed.
     
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  4. Azazel

    Azazel Well-Known Member

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    The depreciation schedule will almost certainly be more than that amount in the first year. The cost of the DP is also deductible.
     
  5. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

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    As @Depreciator said, it'll be worth it.

    Probably come out on top in year 1 (money back vs cost of dep schedule), then it's pure cream from there.
     
  6. sammmeee

    sammmeee Well-Known Member

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    definitely worth it. All my properties are/have been old Pre 1970's. It constantly astonishes me to what the depro report comes up with. Definitely do it, as for a one of payment around 700 this will pay dividends each tax time.

    Oh forgot to add. go with a company that is specifically there for depro reports. I have been with BMT and happy. My mum used another company in Mildura and it was woeful!
     
  7. larrylarry

    larrylarry Well-Known Member

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    Thanks. I will definitely get a depreciation schedule once property is settled. I assume you will obtain a report after say painting, light fixtures and other things done up?

    What do you provide to the depreciation company? Receipts? what if it's cash job?
     
  8. BMT Tax Depreciation

    BMT Tax Depreciation Chris Business Member

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    If there's no pre-renovation period where you're deriving income from the property (and hence are ineligible for scrapping deductions) then you could probably stand to wait until any works are completed. However, it does not really matter: for those works a provider needs to use your costs and doesn't need to see the finished results. All that is required is a breakdown of what was done, when it was done and how much it cost you. Receipts are not required, as they remain your responsibility. If it's a cash job then the same thing applies.
     
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  9. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Haven't seen one that hasn't paid for itself within the first year or two yet.

    Pretty sure I'm still claiming something against a 50 year old IP in regional NSW.

    Cheers

    Jamie
     
  10. larrylarry

    larrylarry Well-Known Member

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    Thanks. The one that I'm potentially buying is 100 years old or a bit less. Anyhow will get in touch with BMT.
     
  11. wylie

    wylie Moderator Staff Member

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    I'm a bit confused by these answers. We had a report done recently for a 1950s brick house. At the time I asked the company if it was worth having two queenslanders assessed. Both houses were bought in shabby condition, and over the years we have done them up. They are mid-level renovated, not high end and anything we have spent (kitchen, bathroom, painting, floors polished) will have been added to the appropriate area for our ongoing taxation returns. We were told it wasn't worth doing a report on them.

    However, in about six months both these houses will be lifted and moved on their blocks to allow creation of a new block between the houses. At that time, we will likely scrap kitchens and bathrooms and install new ones, probably build underneath too.

    So, my question is whether or not we should get either a depreciation report done (guessing we are depreciating things already, but probably not as much as we could be if assessed professionally?) or a scrapping report done before we touch them?
     
  12. Depreciator

    Depreciator Moderator Staff Member

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    Wylie, if your accountant has all the costs and has been claiming stuff, they will be able to take care of any disposal (scrapping) claim.
     
  13. BMT Tax Depreciation

    BMT Tax Depreciation Chris Business Member

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    It depends on when you bought them. If they were pre-87 and you'd owned them for a significant period before you renovated, it is likely that all depreciation available was confined to the renovations. It would take a significant renovation to warrant getting a depreciation schedule; for a more minor renovation, as Depreciator said, you're often just as well served by going to your accountant. However, it's an unknown quantity to us how much your accountant would charge for doing this extra work. It could be more cost-effective to get a schedule anyway, and we're generally better at identifying ways to accelerate deductions than accountants are.

    There's a common misconception presented above: a scrapping report/schedule is always the second part of a two-step process (you need to be depreciating assets first in order to scrap them) and it's what is provided after the renovation.

    Regardless, the answer to the above question will depend on the following: what are you currently depreciating and how?

    Again, the missing pieces of the puzzle for me are a.) when did you buy the properties? and b.) what kind of overall expense was involved in the renovations, and when did they take place?
     
  14. wylie

    wylie Moderator Staff Member

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    Thanks to you both for those answers. To answer Chris's question, one house purchased 1997 and kitchen done immediately, bathroom not done, just new vanity twice over that time. Floors polished, house painted, new roof. All this is being dealt with where appropriate, by our accountant.

    Second house purchased 2006 and $17K reno done immediately - new bathroom, paint inside, floors polished, walls removed, original 1930 kitchen just tidied up, new oven, new dishwasher x 2. Again, all dealt with already in our tax returns.

    It was more the fact we will be scrapping all this, but I guess at that time, those things that are scrapped and not reused will be written off.

    Things like the stumps and battens were mentioned when I asked the depreciation company. Advice given was that it was likely not worth doing a report.
     
  15. Depreciator

    Depreciator Moderator Staff Member

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    Your accountant has been claiming the Assets and the Cap Works - building stuff. So when any of that is tossed out, he will know the written-down value of it and will be able to claim that upon disposal. Easy.
     
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  16. wylie

    wylie Moderator Staff Member

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    Thanks for that. I have looked at this a few times over those intervening years, and was comfortable with the answers, but when a question comes up like this first post, I do wonder if I've done the right thing. I'm very happy with those answers, thank you both.
     
  17. JacM

    JacM VIC Buyer's Agent Business Member

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    Certainly worth it, and has been suggested, give the depreciator a ring. I've found providing them with photos and any other info helps them guestimate just how worth it that it'll be.

    I've even heard them say "oh, i see new lightswitches on the wall which suggests a probable recent rewiring, and the rewiring is depreciable also". Nice.