Do you need a depreciation report on new home?

Discussion in 'Accounting & Tax' started by Jmillar, 15th Jun, 2019.

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  1. Jmillar

    Jmillar Well-Known Member

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    Could be a dumb question but do I need a depreciation report on a dual key home I've just built? Or does my accountant just look at the construction price and use that?

    Thanks
     
  2. craigc

    craigc Well-Known Member

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    Yes, lots of threads - depreciation will be a very good benefit for you!
     
  3. Scott No Mates

    Scott No Mates Well-Known Member

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    @Jmillar - the difference being a straight 2.5% applied to the cost of construction or a detailed approach with accelerated depreciation being applied across fixtures and fittings and the lower rate applied to the structure.
     
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  4. Momentum

    Momentum Well-Known Member

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    I think you'll find a depreciation report will calculate individual items higher than using the total build amount
     
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  5. Jmillar

    Jmillar Well-Known Member

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    Thanks guys, makes sense. Cheers
     
  6. Depreciator

    Depreciator Well-Known Member

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    The building itself depreciates at 2.5%. All the Assets need individual values ascribed to them and they depreciate much more quickly. These will be things like appliances, HWS, air con, floor coverings, blinds/curtains etc etc. Your account will not want to have a stab at the values of that stuff.
     
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  7. 20067

    20067 Member

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    Yes you do need to get a tax depreciation report from a qualified quantity surveyor - the ATO does not recognise accountants as experts in this area, so it is always best to get one prepared by a qualified QS - they can back date them and most last for 10 years - great depreciation deductions which will reduce any income tax payable on rental profit :)
     
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  8. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    I am no expert on depreciation, but doesn't the legislation say something like if you know the cost of an asset you must use that cost to calculate depreciation?
     
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  9. Depreciator

    Depreciator Well-Known Member

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    Yep. If the costs are known they must be used and are a starting point for a Dep Schedule.
    In the case of a brand new home, the total build cost is usually known. This cost will invariably include Assets. The Assets need individual values ascribed to them. In the eyes of the ATO. it requires no qualifications to put a value on a stove or some carpet. So with a building contract and some common sense, anybody can work out the depreciation entitlement. The rules are pretty simple.
    BUT, if the construction cost of a building is NOT known, quantity surveyors are the people best qualified to estimate it. Accountants are not qualified to estimate the construction cost of a building.
     
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  10. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    But I guess even if you know the cost to construct the building you will not know how much to attributing to fixtures and how much to the building, also how much to each item of the fixtures.
    So even with a new build and even if you know the costs you should still engage a QS?
     
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  11. 20067

    20067 Member

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    Exactly Terry which is why us accountants always recommend QS tax depreciation reports be sought
     
  12. Depreciator

    Depreciator Well-Known Member

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    Of course I would say it's always best to get a QS involved. (And ideally a QS that does depreciation work - many don't except in tax season when the phone rings.)
    There is a good chance a QS that does depreciation stuff will be able to maximise the depreciation.
    But if the costs are known, it is not illegal or anything like that for people (accountants included) to muddle through on their own.
     
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  13. BMT Tax Depreciation

    BMT Tax Depreciation Chris Business Member

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    Bingo. There's a big difference between putting a value on an oven and putting the maximum possible value on an oven.
     
  14. wylie

    wylie Moderator Staff Member

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    So in the case where we've totally renovated a house, new kitchen, new bathroom, new stairs, painted, floors polished, air-cons installed etc etc... because we have breakups of all we spent, it would be unnecessary to get in a QS and our accountant just uses the actual invoices and dockets?
     
  15. Depreciator

    Depreciator Well-Known Member

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    Yep. The accountant could do it. But a QS might squeeze more out of it by allocating some costs for installation or appliances and things like that.
     
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  16. Jmillar

    Jmillar Well-Known Member

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    Thanks Scott, I've been in touch with your team re this property and another. I'm going overseas next week but will get them done when I'm back. Cheers
     
  17. Momentum

    Momentum Well-Known Member

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    Unethical pro tip: if you buy an IP and do a renovation, lie to your QS and tell him you bought it with the reno already done. You will get a LOT more depreciation than if you supplied them with the cost of the reno.
     
  18. hieund85

    hieund85 Well-Known Member

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    Based on my limited understanding, it is incorrect. You cannot claim depreciation on fixtures and fittings such as appliances if you did not pay for it.
     
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  19. BMT Tax Depreciation

    BMT Tax Depreciation Chris Business Member

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    The latter is a very good point. Momentum had more of a point before the 2017 Federal Budget, not that I'd condone lying to your friendly, ethical QS. In Momentum's scenario, you won't get to claim on the plant and equipment. If you buy the property and renovate it with new plant and equipment (without living in it), you can make the claim.

    These days, Momentum only has a point if you buy the house and live in it while renovating it, which makes it an even bigger, harder-to-swallow lie.
     
  20. Leslie

    Leslie Well-Known Member

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    I am wondering if I can still claim Capital Works Deduction for the renovation works done on in a Investment Property. I own this IP since 2011 but renovated last year with new tiles and carpet. Post 2017, am I still able to claim as Capital works deduction? Thank you for your response.