Update depreciation schedule ... confused...

Please help! I have a depreciation schedule that was done in 2007 when we purchased IP. Last year we replaced carpets and bought new oven. Since we can't claim cost outright, these have to be depreciated ....?

I asked the surveyor to update the schedule and they said just to give the details to an accountant. I always do our own tax return, and am fairly happy to keep doing so. I contacted a popup tax shop just to ask the cost of updating the schedule, and they said they can't update it if done by a surveyor.

So .... I'm guessing that the carpets and oven is just depreciated separately ... and I should be able to do that myself at tax time by using prime method etc etc ..... but then my old schedule is now incorrect as it still has old carpets included..... I just grab the overall figure for each year and I don't look at individual items on the schedule ..... I am SO confused ... I am happy to use accountant or surveyor to just update my schedule and pay a bit of money, if anyone can explain to me I would be so happy ..... thanks

 

Of course an accountant can update such a simple amendment.

Kudos to the QS for telling you that it is such a simple issue that you could save yourself the cost of redoing a schedule for two small amendments for which you have all the costings.

Just find a competent accountant, or a QS who has a bit of spare time to tweak your schedule.

Or do it yourself after reviewing ATO online guides, e.g.

Guide to depreciating assets 2016

Rental properties 2016

e.g.

Cost of removing and disposing of the old carpet & ovens are balancing adjustment events. These will end up with immediate scrapping deductions.

Check from the schedule if any items are in a low value pool.

If no low value pool then look up the Commissioner's default effective lives for new carpet and oven, see TR 2016/1 table B. Also elect to use the diminishing value method for fastest depreciation.

 

I wouldnt be using the PC method but that is your choice.Once an asset is commenced using a method its remains that way...There may be merits to pooling assets too. We routinely update and modify depreciation schedules for taxpayer purchased items not on a QS report. But the software is within the tax return....

I love the comment I'm guessing that the carpets and oven is just depreciated separately. I would question what other property related deductions are not maximised or even incorrect.

 

Would these appear on a P&L balance sheet as expenses with the depreciable value that the item had remaining at the time of scrapping?

 

Unsure what you mean. P&L and Balance sheet arent tax concepts for ordinary passive investment properties.

 

I mean in my costs and revenue spreadsheet, would an item that has been scrapped show as a cost, with a figure equal to the residual depreciable value at the date of scrapping?

 

In 25 years of property investing, we have replaced carpets and bought new ovens on more than one occasion.

We just give our accountant the receipts and let them sort it out.

We have better things to do than worry about that sort of ****.

 

It probably only seem to be a bother to those who may purposely buy a fully renovated place, or like Pauls said, some apartments.

I say it is fair enough, govt. does not want double dipping, if it was te other way around, everyone would say they do not want to pay multiple times for the same thing too. Fair enough.

 

It would depend. Generally its final value is its terminating value if it is destroyed or obsolete AND the property will continue to produce rents. If the item/s are sold the value is reduced - The loss may or may not be deductible. If you use it for private purposes there is no loss.

 

No its far more basic than that. You buy a 6 month old apartment or house from the original owner. Under the new rules you cant claim anything except the eligible construction capital allowance of 2.5% pa....The almost new appliances, carpets etc etc have a depreciation value of $0..The former owner may have a depreciation schedule and have had the ability to claim $10K.....

 

That's really strange. While we tell people that their accountant can do it in simple cases, that a QS has refused to update a schedule boggles the mind.

 

Yes, I see that, I have bought recent builds, but did so due to less maintenance type issues, not to get the depreciation.

At the end of the day, I do not add or look at depreciation in calcs when buying, but for those that do and look for near new places or for just renovated ones where your paying for all this, you would now need to consider you cannot depreciate these things.

For the OP benefit, if not going back to who did the report & you ask accountant to enter, if you change accountants, is this a problem, or is it all stored online for the next accountant to carry on ?

 

While depreciation itself should not dictate what you buy you really should consider depreciation if its available in your purchase calcs. I regularly meet people who are stunned that an apparent cashflow negative property becomes cashflow +ve when taxes are factored in. They then realise there are far more properties to consider....For very high income earners particularly it can mean a neutral cashflow on rents minus expenses suddenly becomes a tax saver.

 

The tax return or the QS report can be used by any tax agent to continue matters. Often both sources are used when the taxpayer has paid for items after the QS report.

One of the really silly things some accountants do is re-enter the QS report into the return. Thats real silly and makes something simple really complex (adds to costs too) and can dramatically affect deductions the QS base on pooling etc. Tax software doesnt automate items going to a pool and would be time consuming to do. The QS report should never be entered in detail. Just the annual sums in the rental schedule. And the accountant probably charges for the effort in putting the QS details into the tax return.....It takes a bit of time. I reckon its a 100% waste of time. Worse still I have seen some take short cuts to this process and they bundle assets together. So effective life write offs are impossible.

Tip : If a tax agent re-enters the QS report in the tax return you may not be dealing with a property savvy adviser.

 

What ? how would they do that ? if you give them an updated schedule ?

Must be easier/better if your QS firm will add for you ? Or is this where many mistakes are introduced as per above ?