Hi All, Few months ago I bought an investment property in a discretionary trust. I will subdivide the land, sell the existing house and keep the land to develop it. It is negative in $1,500 per year. The depreciation schedule needs to be prepared now. These schedules cost between $300 to $800. (I do understand that I will get what I paid) My intention is to sell in 2 year time. As I won’t be offsetting against any salary, I won’t be able to do much with the depreciation amount I will get during these 2 years, as it is negative. Plus, if in the event that let’s say next year it is a positive geared property, and I can use the depreciation I will get, I have to pay back the ATO “ALL” depreciation I claimed as soon as I sell it. Therefore, I do not see any difference in getting a $300 or $800 depreciation schedule. Can I assume that spending the minimum ($300) it will be sufficient? or am I missing anything in here? Please let me know your thoughts and comments. Thanks!
If everything is on revenue account, and if you do not need extra deductions upfront (so no other income to offset and tax losses) the net outcome is the same once you sell - regardless if you claim depreciation or not. You can either claim the cost of the property as depreciation or as the cost of stock sold. Just take care with that approach. I have seen many developments take a lot longer than anticipated. The extra depreciation deductions could be used in the down years, potentially, to offset against other income. A properly done schedule is then useful.
If the property isnt intended to produce income from rent there may be little to consider as a deduction. No scrapping deduction either. There is no add back from depreciation as such. I would invest the $300 into tax advice on the margin scheme
This is the section I'm having trouble with: * First, is the existing house producing income in any way, or are you at least trying to produce income there? * Are you saying that it's not worth claiming depreciation on a negatively geared property, or not worth claiming depreciation if you have no taxable income? * What do you mean when you say you'll have to pay all your depreciation back to the ATO? Phrased like that, it's not exactly true.
If I understand correctly you say no income for two years....why claim QS deductions.... That may be true. Personal advice would address this. CGT laws however dont allow you do choose not to claim QS deductions and then not adjust the costbase. CGT law says "the amount you COULD have deducted"" reduces the cost base. So even if no deduction is claimed the costbase still gets reduced. BUT .....the unclaimed deduction may also be a secondary addition to the costbase as a new element.
Hi, 1) The house is a rental property, but neutrally geared. After outgoings and bank interest, etc, there is no profit left and will remain like this during the next 2 years. The intention is to sell existing house and then build the rear part of the land. 2) I know I must claim the depreciation and this never was an issue. The question is how much to spend in the depreciation schedule ($300 or $800) given that I will not see any single cent from the depreciation. 3) When I sell I will have to return back all depreciation I claimed (100% of the entire amount I claimed during the ownership of the investment property) Could you please advise?
You won't be able to get personal advice on the forum so you will need to contact someone directly and clarify the entire situation. Are you saying that your taxable income is then $0? If so, then you can still claim the depreciation and carry forward the rental loss, so you do still get the benefit from it but it gets deferred. In addition to my comments above, if you are selling the front part and building on the back part you should get some personalised advice anyway.
I dont agree with that view. You have formed an opinion but its likely to be wrong. You intend to remove and sell the dwelling ? The proceeds on sale may be reduced by the available building costs in the QS report. Of course GST may also be a factor but be under the turnover threshold perhaps. I will concur with the other view to get personal advice.
