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Total Div 43 deductions on depreciation schedule

Discussion in 'Accounting & Tax' started by Befuddled, 21st Sep, 2015.

  1. Befuddled

    Befuddled Well-Known Member

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    The other day I was shown the depreciation schedule of a property. Straight away one figure jumped out at me as being odd. The total division 43 (building write-off) deductions over 40yrs is around 165k. The property was purchased brand new for 480k.

    In comparison, my IP of comparable purchase price and age has total division 43 deductions over 40yrs of over 450k.

    I don't understand why there is such a big difference. My report was done by one of the recommended/big quantity surveyors around here where as I haven't heard of the folks that did the other report.

    Is it common for 2 different quantity surveyors to come up with totally different division 43 totals on the same property?

    Would it be worthwhile getting another report done to maximise deductions?

    If a new report is produced and it turns out to have a lot more deductions, could past tax returns be amended?
     
  2. Depreciator

    Depreciator Moderator Staff Member

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    Pose the question to the company that did the Schedule first and see what they say. If it's an error, they would fix it.
     
  3. BMT Tax Depreciation

    BMT Tax Depreciation Chris Business Member

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    Yes, but that is a huge difference. How do the properties compare in terms of size and level of renovation? Also, $450k on your original property sounds like a very good figure if your purchase price was only $30k more than that! That $450k doesn't include the fixtures and fittings so it seems like you made the right deal at the right time there.

    Quantity surveyors make estimates in line with tax rulings and it's not an exact science. However, I'd want to know more about the two properties before hazarding more of a guess.

    What Depreciator said. This needs to be investigated a bit further first.
     
  4. Befuddled

    Befuddled Well-Known Member

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    I'll get in touch with them and find out.
     
  5. Befuddled

    Befuddled Well-Known Member

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    My property:
    • Purchased brand new for 500k in 2013.
    • 3/2/1 apartment in Homebush West
    • Top floor in a 6 storey building. 30 lots in the building.
    • Total div 40: ~45k
    • Total div 43: ~450k
    Other property:
    • Purchased brand new for 480k in 2013
    • 1/1/1 apartment in Rhodes
    • Level 5 of ~20 storey building.
    • Total div 40: ~22k
    • Total div 43: ~165k
    I made the assumption that the sum of div 40 and div 43 would be roughly equal to purchase price assuming bought new. Is this wrong?
     
  6. Depreciator

    Depreciator Moderator Staff Member

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    Unless somebody gets a great deal, the sum of Div 43 and 40 rarely equals the purchase price. Land and developer profit needs to be stripped out to start with.
    If somebody owns a block of land and pays a builder to put a house on it, the Div 43 and 40 total is likely to equal in the contract price.
     
  7. BMT Tax Depreciation

    BMT Tax Depreciation Chris Business Member

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    This doesn't make a whole lot of sense to me. Assuming that the total depreciation is even close to being accurate, this means that the developer barely made $5000 profit off that unit, and that's without factoring the involvement of a real estate agent, etc., which would take it down further. If that's the case, they really must have been desperate to offload them.

    Exactly. It's a raw value (sort of) of applicable physical assets. I'm sure you've had to explain this to disgruntled clients too when they demand to know why their renovated 1960s house hasn't netted them $600k in deductions!
     
  8. Depreciator

    Depreciator Moderator Staff Member

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    Many times.
     
  9. Befuddled

    Befuddled Well-Known Member

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    Bit of an unique situation. The project is a big multi-staged development and I got in early. Vendor wanted to raise funds for the later stages so was prepared to sell it at discount.

    Also, the vendor did everything in-house including real estate agent services, property management which would have minimised costs for them. They even did the strata management of the whole project so took a long-term view of profiting from the levies more so than from the sale itself.
     
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  10. mugen

    mugen Member

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    Correct me if I'm wrong but I always thought the estimated deduction figure on DIV43 is based on the construction cost instead of the purchase price.

    Looks like the huge difference here is the configuration. I would imagine 3/2/1 vs 1/1/1 is a hardly similar.
     
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  11. Depreciator

    Depreciator Moderator Staff Member

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    That is correct. When I explain it to people, I say imagine buying a bog standard project home sitting right on the beach vs that same home in the far flung outer suburbs. The home on the beach is going to cost a lot more to buy, but may not have cost any more to build.

    Scott
     
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