Is it worth to get a Depreciation schedule for a old property

I am in the process of buying an IP which is 40 years old. But it has had some renos done down the track.

Tax agent asked me to get a depreciation schedule done. When I spoken to BMT they said to me it's not worth getting it done if there is no more than $50K renos done in near future. He said it will cost me $770 but I won't be able to cover it. Does that make sense generally?

Just wondering if there is much advantage of getting it done. Thanks.

 

yes

 

I got given the same advice for an older property that I was renovating.

They asked me to estimate the reno costs and then said it would be worthwhile doing one after the fact, which I did.

 

Definitely!

 

They’re correct. You can use an online calculator to see how much depreciation is left (if any). On a unit, in a complex, 40 years old - not much at all and cost of Schedule would outweigh any rebate.

 

If you'd like for me to look into it for you in order to confirm this (even if just for the benefit of others reading this thread), please send me a message with the property address. I should be able to reiterate any explanation.

In the meantime, look at it this way: when you spoke to someone at BMT, their job was to sell you a depreciation schedule. If they didn't try to do this, there's probably a good reason for it.

 

Here is the property https://www.realestate.com.au/property/19-shannon-st-woodridge-qld-4114

Fairly new fence
Bathroom and kitchen renovated 12 months ago
New stove
Fairly new floor covering
Fairly new plantation shutters

Thanks Chris.

 

Okay, let's break it down:

Firstly, until you spend more money on the property, you can only claim on prior improvements to capital works. They depreciate at 2.5% p.a. over 40 years. We need to double our fee in deductions in order to meet our guarantee, which you're free to waive if you're really hungry for deductions and/or playing a long game. That means that we'd need to get towards $60k in prior capital works to deem it viable in most cases.

You can't claim on the stove. Forget it.
If, by floor covering, you're referring to the carpet, forget it. You can't claim it. The tiling and floorboard polishing, yes, but they're relatively cheap jobs to stretch out over forty years' worth of claims.
The same might go for the fencing, which could give you a couple of hundred dollars' worth of deductions per year. That's a bit more substantial.
If the bathroom has been renovated recently, that listing is doing a good job of not showing it in its best light. We'd get a little bit on it, though.
That leaves the kitchen, where you can claim the cabinetry, sinks, benchtops, etc., but not the appliances.

So, we might get to around $1000 in claims per year if we're doing well, which means it could take you a few tax returns to break even on our fee. Some people are fine with that if they're in it for the long haul because it will pay off eventually, but I'd exercise caution and probably at least wait until I'd made some of my own improvements, particularly new plant and equipment items on which I could claim.

Now, that's not going to take $50k of spending, so I hope that was just a simple miscommunication. You could spend as little as, say, $10,000 to $20,000. Combined with the existing improvements that are still present after your works, that would get you into the realm of immediate viability.

However, you'd have to be keen to worry about it before then.

 

@BMT Tax Depreciation If you don't mind, I'll jump in and ask another question, similar issue.
I've got an old IP (60's type of old). I reckon there's nothing to depreciate anymore.
In my previous IP I've used you guys as the property wasn't that old and the schedule was awesome, every little thing was on it. I was very impressed.

I'm about to add some improvements to my IP.
Should I engage with you or can my accountant realise the depreciation since everything is gonna be brand new with invoices and everything?
I wouldn't mind paying for a service if it makes financial sense.

 

We're looking specifically for works that have happened since 1987, but if they're as modest or more modest as the previous example, you're probably right. I'm happy to look at any pictures if they're floating around, and can confirm when you bought it and started renting it.

Good to hear! Thanks for the feedback.

As I suggested to Samj, we don't want to be selling reports that don't make financial sense.

When you've finished your renovations, or have a good enough idea about their scope and costs, I suggest asking your accountant. They may wish to handle it themselves and the information may be straightforward enough that they'll be capable of it. However, there can still reasons why you might engage us even if you and the accountant think all costs are accounted for (and please forgive me from pasting this in from another thread here):

• To identify any prior post-1987 improvements, whether original or previous owners’ renovations. There may be a surprising amount of value in, say, a back deck or a detached garage
• Risk minimisation (it's a layer of audit protection)
• When renovations get complicated, a.) that can result in a lot of work on the accounting end, and b.) there’s a greater chance that works might not be itemised to an optimal degree. E.g., you might have a $20,000 invoice for a kitchen renovation (including plant) but no breakdown of individual costs
• To get those plant items that might be less obvious or not as well defined by the ATO. My favourite example I pose to people is: how do you depreciate a toilet seat?

 

@BMT Tax Depreciation Thanx for that!
My accountant is the one who recommend you in the first place, so I'll talk to him when we do this year tax return. Seems it'll be better to engage with you once I've done with all the improvements.

 

I had similar situation many years ago
I called Depreciator and sent them some pix didn’t take much Time at all
They came back and said they believed it would still be worthwhile so I commissioned it (can’t remember if they did physical inspection or I sent more pix) and yes I was able to claim for things I didn’t know I could - not a lot but more than cost of report

I think these services know there’s obviously no value if their reports can’t find much for you to claim
They probably don’t want to waste their time doing them either so they tend to be pretty upfront about it if you can give them some info

 

Well, I can't speak for others, but it's also that selling someone an investment product that provides no benefit is the wrong thing to do.

 

Definitely worth doing.

Most offer a ‘no win no fee’ type arrangement.
...so you can’t lose!

Will

 

Thanks, that's what I heard from my accountant as well. I have got more comprehensive response from Washington Brown. Do you know if there is any better company in Brisbane?

 

There’s a few I would personally recommend.
...knowing each of the company directors.

Happy to PM you their details (admin may not like me posting it here)

 

Just adding a note on final outcome; just for future readers. After getting very disappointing figures for larger depreciation firms, I ended up going ahead with WRC Quantity surveyors (Quantity Surveyor Brisbane | WRC Quantity Surveying)

They found over $100,000 depreciation items while some companies said there is not even $50,000 items by looking at online photos. Not only they found many more items, but also they charged a few hundred dollars less than other big firms.

Thank you @Will Callaghan !