Improvements directly after purchase - To depreciate or not to depreciate??

Apologies I don't think my question is very clear. I'm trying to gain an understanding if there is a way to maximise my div 43 amount. The crux of my train of thought is my assumption that on a new build the QS would look at it and do an estimation of all new costs, $30k for the new roof (Div 43), $25k worth of new internal walls and plaster (Div 43), $2k worth of new carpet (Div 40) etc etc.

I will be slowly chipping away at this project doing majority of the work myself, for a total spend of probably $60k whereas a builder cost, or QS estimate would be closer to $120k. I will retain the existing slab, unground services and exterior brick walls (over 40 years old) but all else will be replaced. I understand these old elements are fully depreciated and would not form a part of the depreciation schedule being prepared now.

The value / cost to construct the building will be higher than the cost I'll end up building it for. It seems a bit dodgy to get a QS in and depreciate the building on a costing estimate basis when I know I can add up all my bunnings receipts and it'll total half the amount of the construction costing estimate, but then at the same time its not ideal if my depreciation is limited because I'm getting in there with sweat equity to save money.

I hope this is making some sort of sense to someone that isn't me!

 

Truly to maximise the deduction is to pay someone else. For the reno build. But the existing build wont wont vary. Only a QS can assess tge existing build for div 43 BEFORE you start

 

Let me start by asking this: do you know of many (any?) tax deductions the ATO will allow you to claim on money you haven't spent?

When the depreciation claim is based on your works, and the cost of the works is known, a quantity surveyor doesn't estimate them. There's no need to estimate them when the amount is known (you don't need to guess the amount of jelly beans in a jar if there's a sign next to it saying "There are 852 jelly beans in this jar").

However, that doesn't mean that there's no point getting a QS involved. As Paul said, there's still room to maximise deductions. Another question: how do you depreciate a toilet seat? As part of the toilet? No. Yet, you won't find "toilet seat" in TR 2019/5. The answer might be the difference between writing it off and claiming small amounts yearly over four decades.

Do you get to claim an amount for your own labour? Well, are you paying yourself?

It does sound to me like 100% of your depreciation claim will come from your costs.

Bingo. "Sweat equity" is an interesting concept but it means nothing to the ATO. You're doing your own work to save money but the trade-off is that you won't make the tax savings you would have achieved by paying someone else. It's a situation where you can't have your cake and eat it too.

Again, I'd like to point out that, though they might have to "colour between the lines" by limiting themselves to your costs, a quantity surveyor can apply know-how in other ways (as discussed above) in order to maximise/accelerate your claims. Although, sometimes we ask for costs and we're told the equivalent of, "Sorry, the dog ate them." That's a different matter altogether.

 

I had never even considered toilet seats before. There must be many small things like this that most miss.

 

Males for the most part or so I'm told.

 

Better to miss the seat (provided it's on the correct side) than to hit it, no?

 

I was onsite in a Block apartment when a depreciation review was being done (BMT). I was stunned by some of the costs for small things. Some loo seats do cost hundreds !! (Square ones especially and those with what seems like a ladies entertainment system built in) And a small extraction fan and ducting can run to a grand or two. etc.....Just things like flash morticed locks and lever sets can be massive cost at $1k+ a door...multipled by ?

- water filters in a kitchen
- Gagennau appliances !!!
- Tapware (ranges from Bunnings budget up to ??????)
- Entry electronics
- Networking devices ie Alexa
- Brass door stops
- Fire panels, sprinkers, distribution gear and so on
- Laundry chutes
- even a safe !! (2.5%)...Its going nowhere.


Found a NTAA list (branded by a firm who didnt credit NTAA) as a guide to Div 40 and 43 examples

 

Haha yes very good points Chris. I can see how that could be classed as double dipping. It wouldn't surprise me if all of those small things overlooked could quickly add up to thousands of dollars and make your schedule more than worth it! Thank you for all the wisdom