Rental property deduction or depreciation? Carpets and curtains

Discussion in 'Accounting & Tax' started by noneother, 27th Oct, 2021.

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  1. noneother

    noneother Well-Known Member

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    Hi brains trust

    I am facing the following scenarios and wanted to check my understanding of whether it's a deduction or depreciation related to my rental property:

    1. Carpets in all rooms of the house have been badly stained (mould) and smell terrible. I have the option of a) replacing the carpets with a like for like, or b) ripping the carpet up and polishing and sanding the floorboards.

    Would (a) be a depreciation, and (b) be a deduction?

    2. Every curtain in the house has been discarded because of either mould or tenants soiling them. I have decided to install rollerblinds where the curtains have been. Each rollerblind is under $300. Each blind is the same in colour and function but can these be seen by the tax authorities as 'a set'? They're custom made individually to each window so it's function is distinct and separate.

    Thanks in advance

     
  2. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    The new carpet would be depreciated. The old carpet would have been depreciating however it is possible its already valueless. If it was on a depreciation schedule the residual value could be scrapped and claimed if the asset is not pooled.

    The blinds would be a set in acquired at the same time etc. Even if seperately invoiced. But if acquired apart they may not be. eg one this month, another next month etc You must consider the property not the window in the issue of assets. One blind = one window but a house has many windows so "Blinds" are the asset being acquired. Otherwise every home would have the new roof written off when each tile is considered wouldnt they ? And people may also carpet each room ?
     
  3. Kim_DuoTax

    Kim_DuoTax Active Member Business Member

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    Paul is spot on here regarding the carpet, once it is removed and replaced the new carpet is going to be considered a depreciable asset. With Carpets, unless you are spot repairing areas of it, they are generally always considered for depreciation instead of repair or maintenance.

    If you decide to go down the route of option B. Since there is no assets you are installing into the property for a QS to depreciate, it would be considered a maintenance expense since the floorboards are already existing and are not considered a floor covering.

    Regarding the roller blinds, Paul is also correct with his advice. Blinds are itemised as 1 depreciable asset when they are purchased and installed at the same time. This is the same as if you had multiple bathrooms with bathroom accessories installed, they would be pooled in the one item tray instead of separating the each tap.
     
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  4. Will Callaghan

    Will Callaghan Well-Known Member

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    Some good advice has already been given here by Paul & Kim.

    and here's some additional thoughts...

    Carpets:
    Assuming you were already claiming depreciation on the carpets - and your tenants trashed them - you can claim the scrapping of the existing carpets.
    - That is claiming the bulk remaining value of the caprets in the FY you had to replace them.

    Secondly, if the tenants did trash them, there is a case for claiming the new carpets at 100% write-off as 'making good' damage done by tenants.
    - but you may prefer to err on the side of caution here and just depreciate the new carpets over time.

    If you don't qualify for the depreciation of the carpets (beacuse you offered the property for rent after 1 July 2017) then the existing carpet has no value. So can't claim any scrapping - but can still claim the new carpet costs.

    Polished Floors:
    If you go that route you could claim the sanding & polishing as Repairs & Maintenance - claimable at 100% write-off.
    or...claim the sanding and polishing at 2.5% pa for the next 40-years.

    Blinds:
    Like mentioned previously, these are pooled to give you a bulk price. Say $2,000. Sadly you can't claim 10 blinds at $200ea claimable at 100% write-off.

    If however, you had 'eclectic' tastes and made every blind different (non-matching) you could then claim each blind at 100% write-off.

    Like smoke detectors...different 'detecting' methods by different brands = individual items and claimable at 100% write off...even though the cost may have been $2,000 to supply and install.


    Hope thaat helps


    Will
     
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  5. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    If that room is replaced out of a larger area of carpeted rooms, yes. But replacement of carpet means new carpet is otherwise a new asset. The general principle is the $300 cost limit

    Not quite. The remaining value from the QS report cant be deduction and scrapping in the conventional deduction sense. But a CGT loss can be recognised for the former carpet. Its one of the reasons why QS reports are still a very viable choice. You can scrap eligible assets that cant be depreciated and recognise a CGT loss.

    Or you could put them in progressively. If practical.
     
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  6. Frozensage

    Frozensage Member

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    Had to replace the split ac and rangehood this FY. Would these be depreciated or I can expense for replacement/maintenance expense? Or is the labour cost expensed but the hardware itself depreciated?
     
  7. Terry_w

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

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    Did you know that an income producing camel can be deducted over a period of 15 years? Tax Trivia
     
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  8. noneother

    noneother Well-Known Member

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    I believe labour component is directly expensed but the units themselves are depreciated above +$300 but if <$300 it's an immediate write-off. Don't forget to choose either diminishing method of depreciation or straight line depreciation
     
  9. JacM

    JacM VIC Buyer's Agent - Melbourne, Geelong, Ballarat Business Member

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    :p:p:p:p:p
     
  10. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    These are new capital assets costing $300plus. They are depreciable using the formula in Div 40 and subject to the Commissioners effective life. The cost is the installed cost and may include labour, freight, other parts or ancilliary costs eg card surcharge etc. These are all added. The start date is the date the asset is first used.

    Eg Fred buys an airconditioner on 1 October. It is received on 8 October. It is installed on 12 October. A new tenant lease commences 14 October which is the start for depreciation
     
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  11. Frozensage

    Frozensage Member

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    If I already have tenant living there then it starts on the date of the install?
     
  12. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Yes
     
  13. craigc

    craigc Well-Known Member

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    Surely over that period the deductions would be a bit humpy! :p:p

    I’ll see myself out.
     
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  14. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Bumpy topic
     
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  15. BMT Tax Depreciation

    BMT Tax Depreciation Chris Business Member

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    That tax ruling holds water for us, that's for sure.
     
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  16. smallbuyer

    smallbuyer Well-Known Member

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  17. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Mee thinks a small business write off if they acquire more camels. ie Not breeding.

    The Div40 issue applies to more than camels. The key issue is burden or working animals to produce income. Note the two exclusions
    - Not dogs
    - Not in use in primary production...Other provisions apply

    "Working beasts and beasts of burden (including camels and horses but excluding working dogs) used in a business other than primary production""

    Other examples may include a circus. Perhaps hauling lumber (eg Thai style foresty operation). A touristy horse ride / wagon operator etc
     

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