Depreciation Schedule

As a tax accountant one of the very limited areas I can "DIY"Capital allowance deductions is where there is no QS report and if actual construction costs are known then I can work out a Div 43 deduction BUTTT....I never recommend it as a QS uses far more precise methodologies and will determine matters that can be depreciated faster etc. IMO its a poor mans depreciation choice. You then get what you didnt pay for.

A dentists is a qualified "Doctor". But you wouldnt ask them about a chest infection. A QS is a specialist tax adviser too....

 

I'm digging up a slightly old thread here but I'm after a depreciation schedule, can anyone recommend someone in Adelaide? And can I also claim the value of things I've replaced, such as the old carpet, rangehood, etc?

 

My advice everytime is the same. Until a QS says its not worth having a QS report you engage the QS to do a QS report. Their fees generally reflect remaining deductions. But that's rare.

 

It's generally understood that if the property was income producing (or at least available for income) before and after the renovation, then you can claim the residual depreciation of things you dispose of. This is known as scrapping.

However, if you've already replaced then it might not be possible. The items need to be valued, and that's difficult if they're at the tip or Vinnie's. You should always get a QS to look at the property prior to any renovations.

Any new items will be able to be depreciated from installation.

 

I'm renovating during settlement, so does that mean I can only claim on what's there on settlement day?

 

No. You can claim anything you add thereafter as well.

However, you probably won't be able to scrap because there's no availability for income prior to renovation. Tax rulings can be very vague about time periods but that is the common interpretation.

 

So if I waited until the day after settlement to replace everything, I'd have had a nice little scrap bonus come tax time?

 

No comment! You would have to ask your accountant what their advice is on this situation. It's a bit of a "How long is a piece of string?" question. There is no specified time.

 

Chris is right to be circumspect. I got a Private Ruling on this stuff (and yes a PR only pertains to an individual's situation). A bloke from the ATO called me, as they often do when you apply for a PR, and he said they wanted the Assets to have earned some income before being disposed of and the residual value claimed. I reckon three months or so would be sufficient. That's enough to demonstrate an initial intention and then a change of plans. That's just my opinion, of course.

 

With you on that. The ATO will want to ensure that there is a nexus between income production and any expense incurred on either side of the expense. Scrapping deduction should always meet this general income rule or these is a concern. There may also be a concern regarding initial repairs or the value of items to be scrapped.

Arguably if a property is acquired and is dilapidated and needs a new kitchen the old kitchen may already have been scrapped. When ? Perhaps he former owner has already scrapped it and you also want to claim that same value ? The depreciation schedule is not necessarily a reflection on the future existence of any asset or its carrying value. For example the former owner can hand you their schedule and it shows a pool pump, solar fittings, pool fence etc ...But when you buy there is no pool. How can you later scrap what doesn't exist ?

 

I get the general opinion here one should always get depreciation. I am looking at a unit which as part of strata was built in 1975...being 2015 I don't think there is any building depreciation left (40 yrs)....and plants and other items are standard in unit except new hot water system. Is it worth doing it ??

what are the standard fees one pay for depreciation schedule.... 500, 700, 1000. someone mentioned that you get guarantee or some sort on depreciation schedule or free report... how does that work....

 

The viability and cost of a Dep Schedule will depend in part on location and whether there have been any renos. Any QS that does this sort of stuff will be able to tell you from some photos whether it's worth doing.

 

Mine's close to 100 year old, did a bit of kitchen...depreciation schedule done and dusted.

 

It doesn't matter the age. It doesn't matter the level of renovation. If the property is a recent purchase, and I'm talking within the last five or so years, it is worthwhile depreciating. I do not need photos to tell you that. I just need your settlement date.

The shabbiest of properties still achieve $1500-$2000 in first-year deductions and for the vast majority of investors that equals an immediate positive ROI. Sure, perhaps there'll only be a small profit in tax savings vs. the fee for the schedule, but you'll have the schedule in subsequent years and it's also there should you choose to renovate and scrap. Even if you're only slightly better off, you are still better off. The schedules we've compiled for recent purchases where we have not fulfilled our fee guarantee are as rare as hen's teeth.

A real estate agent told me recently that he wasn't excited about a $2000 tax deduction. I wanted to tell him that if he is not excited about having more money than he already has then he is in the wrong game.

 

The initial repairs will be able to be used for the new schedule

 

Probably drives a lexus. Or a benz. He has got used to paying that for his new car services.

 

I need someone who won't charge $750 for one! Bloody hell I'd be better off if I only claimed half of the deductions by doing it myself

 

Say the QS found you $20k worth of depreciation. That could save you almost $10k

Even if they found just $2000 that could save you almost $1000. Their fee is deductible as well.

 

I would willingly pay the professional engineers who produce the report the $750 if it complies. The value of a QS report would be far more than a few hundred bucks a year. Typically I see a report value at around $40-$100K and often higher. This may equal cashflow of $35K or more. (The ones from The Block were worth $1.9 million each !!). Its not unusual that the first year deduction is $10,000 - For a one off $750 cost thats a terrific return on investment. It would be madness NOT to get one.

Do you take the same approach with a dentist ? DIY surgery ?

Certainly compare prices and get a good value deal but dont use a cheap online provider who lacks the credentials. There is a reason why PC members use the well named QS providers.

 

Mate just speak to bmt or Depreciator. I'm sure it'll be worth your while.