Depreciation schedule

Discussion in 'Accounting & Tax' started by Brendon, 29th Jan, 2017.

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  1. Brendon

    Brendon Well-Known Member

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    I have only recently learnt about depreciation schedules, it turns out when you're young and think you know everything that there is actually more to learn!

    I have a 1960s house that has been an IP for the last 3 years, it has had some basic improvements (before it was an IP) but nothing major.
    Is it worth getting a depreciation schedule done, and if I do can it be back dated for at least last financial year (I haven't done my tax return yet)

    My second IP I have only recently purchased and did a fairly extensive Reno on, I assume I'd get a depreciation report done on this? Does that make all the receipts for work done obsolete or is a combination of both used at tax time?

    I know an accountant will/should help me with this but as I've learnt I'm better to educate myself just in case they aren't all over it.

    Thanks!
     
  2. Ross Forrester

    Ross Forrester Well-Known Member

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    The receipts and work done for ip 2 are good evidence to show a QS. However you do not need a QS if you have receipts.

    The QS for ip 2 should be able to pick up more than just the immediate past Reno and also take the original construction cost.

    For IP 1 the QS can also identify depreciable items like curtains that are probably more recent so they are often worthwhile.

    You can include the depreciation entitlements into your 2016 tax return.
     
  3. Depreciator

    Depreciator Well-Known Member

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    Just to add to what Ross said re: property 2.
    I'm assuming it's a pre 87 built property?
    If so, and if the reno you did was extensive, most of the available depreciation may be in the work you did for which you have costs. Your accountant might be able to take care of everything.
    What was the extent of the reno?
     
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  4. BMT Tax Depreciation

    BMT Tax Depreciation Chris Business Member

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    The general answer to the OP is yes. I'd say that by default to any property purchased within the last 5, possibly up to 7 or 8 years. There would be very few exceptions.

    Not needing a QS if you have receipts is not so black and white. Even if you've fully renovated the house there might be assets that a QS can value that you might not be aware of (roofing, landscaping; the list goes on), and that could add thousands to your claim. With your receipts, you'd also be relying on your accountant to research the right asset class for each item and depreciate it correctly, which is occasionally a tall order in my experience. What class do they put a toilet seat in? Do they know how to use the Low Value Pool correctly?

    So, yes, you can depreciate things yourself if you have all costs but it doesn't mean that you'll get everything you're entitled to.

    Any depreciation schedule worth its salt will show the entire life of the property, so claiming back to when it first became a rental shouldn't be an issue. It does not matter whether the improvements you made were before or after it became an IP; they can be included.

    I would say these comments about IP 2 apply to both, dependent on the age of the property as Depreciator says, but don't forget that previous owners' improvements can be valued even if the original construction can't.

    The curtains, as with all plant items, restart their depreciation from your settlement date. While their condition is a consideration, it's a secondary one, given how long you've owned the property (not very long).
     
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  5. Brendon

    Brendon Well-Known Member

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    Awesome! Great answers, thanks for taking the time to help me out!

    Just to clarify a little, if (when) I get a QS for IP 2 the receipts become a little irrelevant as I will just rely on the QS?

    Thanks a lot @BMT Tax Depreciation @Depreciator @Ross Forrester
     
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  6. Depreciator

    Depreciator Well-Known Member

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    The receipts are relevant because you should only claim what you have spent. In the absence of receipts, a QS can estimate the cost of building works and the values of Assets.
    If the QS estimates a spend less than what the work actually cost, you would no doubt want that fixed. But equally, if they estimate more than you spent, you should want that adjusted, too.
     
  7. Darwin55

    Darwin55 Well-Known Member

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    I have spent around 5k on each of my two seperate properties on hot water service, curtains, some roofing, oven etc. Do I just take all receipts to my tax accountant or do I need to get a full depreciation schedule done for the two houses?
     
  8. Rob G

    Rob G Well-Known Member

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    A tax agent should be able to allocate costs between deductions, depreciation and capital works.

    A QS who is also a registered tax agent would be expected to be better than a general tax agent who is not familiar with property investment.
     
  9. Darwin55

    Darwin55 Well-Known Member

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    Thanks,

    What about the previous financial years spending? Say I spent 4K on a hws or similar the year before. Using a different accountant this year.
     
  10. BMT Tax Depreciation

    BMT Tax Depreciation Chris Business Member

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    Have you already got a schedule for these houses? If not, how long have you owned them for?
     
  11. Darwin55

    Darwin55 Well-Known Member

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    No I don't. Owned one four years or so but only rented it out this financial year. Second financial year for the other
     
  12. BMT Tax Depreciation

    BMT Tax Depreciation Chris Business Member

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    In all but the rarest of circumstances it would be advisable to get a depreciation schedule for these properties. All I need to know is that you bought them in the last five years (as long as you're paying taxes!).
     
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