Depreciation schedule / repairs timing

Discussion in 'Accounting & Tax' started by version, 16th Feb, 2016.

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  1. version

    version New Member

    16th Feb, 2016
    Sydney NSW, Australia
    Let me explain a simple situation the best I can. Hoping this is the right location and relevant :)

    I have a new property in NSW which I settled on in Feb 2013. This was my second property, but the only one I own and so hence it was considered my primary place of residence.
    Lived there from Feb2014 - June 2015. (16 months)
    Rented it out from July 2015 - present (Feb 2016). I am renting another unit in the city closer to work.

    So for the current tax year, this is the first time I need to declare the rental income and claim the expenses on my tax return. This is a bit daunting, so I hired a tax accountant to take care of this.

    There is one twist: The tenant owns a cat and the cat has damaged the carpet (minor urine marks - nothing major, but maybe this is significant). I have agreed with the tenant that the installation of 'floating floor boards' in the unit would be an appropriate action to improve the hygiene and ease maintenance of the unit. Looking to get this done this FY (before June).

    Question is, should I request a depreciation report now, or wait until after the floorboards are installed?
    Second question is, can I claim the expenses as tax deductable since the carpet was damaged?
  2. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

    19th Jun, 2015
    Can I answer some questions you did not ask?
    Putting in floating timber floor boards will not stop the cat from peeing on the floor and the smell will be just as hard (if not impossible) to get out of the timber floor.
    Why are you seeking to claim a tax deduction for damaged carpet instead of seeking the cost of repair / replacement from the tenant whose pet did the damage?
    I would think that timber floor boards would be a capital improvement not a repair and must be depreciated.
    version likes this.
  3. Depreciator

    Depreciator Moderator Staff Member Business Member

    15th Jun, 2015
    If you toss out the carpet, it has a 'disposal value'. You can claim that.
    The floating floor is an Asset and you will depreciate it (along with other stuff in the property).

    I'm with Prop, though. The problem isn't the floor covering, it's the cat. And the tenant should be putting their hand in their pocket.
    Propertunity likes this.
  4. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Member

    18th Jun, 2015
    Your statement I have highlighted is inconsistent with dates. In the period Feb13-Feb14 the property was NOT a main residence. A main residence may only occur on + after occupancy. Certainly a main residence for 16mths (and possibly longer if the absence rule may apply)

    The tenants cat will damage the proposed floor and isn't rectification of damage at this time. Timber is highly susceptible to water damage of any type. The cost would be capital expenditure. It wouldnt harm you to wait fo the QS report... You should be able to amend your 2014 + 2015 returns then. Make sure you ask the QS report to be based on the start date of Feb13.
  5. BMT Tax Depreciation

    BMT Tax Depreciation Chris Business Member

    22nd Jun, 2015
    Assuming the replacement won't be either a.) paid for by the tenant or b.) entirely claimable as repairs/maintenance, then I would get the report done now, before the carpet is replaced. This is the only way in which the timing will be important as far as I can see.

    As Depreciator said, you'll be able to scrap the carpet (write off its residual value) as long as you're going to continue renting the place out. It's hard to value items that aren't present during an inspection and a QS may not always be able to rely on existing photography, therefore it should be viewed before it's disposed of. The report can then be updated later with the new floating timber (being a Division 40 plant and equipment asset and having a 15 year lifespan) or your accountant can simply take care of it.

    But yes, I'd be trying to get the tenant to pay for it as a first option.