Hello all, Looking for some tax advice please. Basically, is it worth getting a TDS in these circumstances? Situation I have an investment property that I'm currently renting out. I plan to demolish it to build two duplexes. It'll have been rented for a year and a half - two years prior to demolition. Type of property - freestanding 4 bedroom, 2 bathroom house Year of build - 1958 Rennovations - the kitchen and bathrooms look like they were done in the 80s or 90s but there's no way for me to find out for sure. The built ins in the bedrooms were probably also from around then. Repainted inside and out 2017. I haven't done any rennos myself. Is there any use in getting a TDS prior to demolition? Realistically, how much could I expect to deduct from my taxable income? Cheers, Lara
Deferred Depreciation on the second hand Assets won't be of any use to you, so it's really going to come down to the kitchen and bathroom renos. You can claim on them at 2.5% while you rent the dwellings out, but more importantly when you demolish them you can claim the residual value of the renos. Not many people know about that possibility. Send me some photos of the renos and I'll get a QS to have a look at them: [email protected]
The ability to claim scrapping needs to be checked. Do you plan to keep both of the duplex places and use them to earn rent once completed ? If so, yes scrapping may be claimed IF there is any value as Scott says above. A 1958 property may not have much value unless it had works completed after 17 July 1985
Hi Paul, Can I ask for more info about “scrapping”? I am in a similar situation as Lara, purchased an old house (1950s) back in 12/2011 and lived there for 1 year and 8 months then rented it out until we demolished the house in Mar this year to build a duplex (currently under construction), which we will keep both properties as rental after construction finish. We did some renovations in the first few months after settlement: painted both internal and external walls, installed a brand new kitchen, new bathroom, built-in wardrobe, rewire the whole house and added one additional toilet etc. We also asked BMT to produce a depreciation schedule once we decided to rent out our place. Now we have a total residual value of $39K as per depreciation schedule produced by BMT ($3K for D40 and $36K under D43). So, can I claim all the value in FY18 as scrapping/disposal? The remaining value of D43 seems high and I have checked the report and it was related to the additional work done in 1998 ($45K) and our renovation in 2012 ($14K) Thanks, Michael
Scrapping deductions only occur with income producing property which is demolished to build income producing property. This appears met and there is a QS report...Tax advice to avoid a serious error may be prudent given the sizeable deduction. The timing of when to claim scrapping is quite important. I believe that the deduction is claimed at the time the assets cease to have a useful life in production of further income. That means the day the tenancy ends so does the asset life. However not all cases are so clear.
