My First Depreciation Schedule is done

Hi guys

I built a house and moved in on the 9/2016 and then moved out 9/2017

I have been renting it out from 9/2017
I did a depreciation schedule and they have said :

Your total depreciation has been assessed to be in excess of $160,000.00 for the life of the property.


As a guide, we have been able to identify depreciation of $3,361.00 for this financial year (2017/18) with a combined $19,000.00 to be claimed over this and the following 4 years. Prior years information (if applicable) can be found in the full report which details all information of the depreciation available for the property from the settlement date of 2/09/2016


I am just trying to understand exactly out of this how much tax i should be able to get back come tax time?

I think for this you need to know my tax bracket? In case you do it is $87567.00 per year gross

 

Hrm, you know this is pretty interesting as my interpretation of the May 2017 budget depreciation changes would actually eliminate a lot of the depreciation available on your property (only capital works is available)

See more info here:
Limit plant and equipment depreciation deductions to outlays actually incurred by investors

You purchased the property before budget night, however it was used as a main residence and hasn't become available until FY18 for rent, therefore the depreciable assets would be deemed '2nd hand' and aren't actually allowed to be depreciated.

I'd be interested in others thoughts on this.

You might find the firm that completed the schedule hasn't got a hold on your full individual circumstances and is aware of the potential tax consequences here.

 

I might need to query them about it

 

Hello, Pat.

I believe I've identified your depreciation schedule in our system (searching for jobs awaiting payment, first name with Pat in it, located in Victoria--I'm a regular Sherlock Holmes). Tanner's advice is good advice but in your case, while you're affected by the Budget rulings, the deductions mentioned refer to your capital works allowance, to which you have full entitlement.

No, you can't make a claim on your plant and equipment items but your capital works allowance should see you with at least an extra $1000-$2000 in your pocket after taxes in most situations. In your tax bracket, you'd be looking at about 37% of your deductions as a saving, but this is something you should confirm with your tax agent because other factors we're not privy to may be at play.

Does that help?

 

Hi yes thanks very much

 

QS Report Warning

This question will become very common. In the above thread I warned that ALL quantity surveyor reports will be at risk of defects if the property use changes. Merely having a QS report is now insufficient. The owners must regularly review the property use and determine if a change occurs which ends some of the deductions. Just handing over the report to a tax agent may also be dangerous if they dont ask and arent given the right information. The taxpayer could have deductions denied if they recklessly claim based on a invalid QS report. There are examples in the above thread.

BUT....Ending Div 40 depreciation deductions may offer a opportunity. The depreciation that cant be claimed may be reflected in one of THREE different ways.

1. If a item is scrapped after the depreciation stops then a CGT loss may be recognised at that time eg the carpet is replaced. The old carpet will be taken up as a CGT loss for the value "preserved in time" at the date the depreciation deductions stopped; and
2. A replacement asset may start to be depreciable at a later date eg replacement carpet; and
3. At disposal of the property any remaining Div 40 - Preserved in time would be recognised as a CGT loss