Depreciation schedule

Hi all

Is a depreciation schedule worth it for a strata retail where the only landlord installation is the A/C?

Note that the A/C has been inherited upon settlement.

Who is the best to use for this? Still the usuals like BMT, Depreciator, Washington Brown etc?

 

In strata title, who owns what may be subtle. The building is an OC responsibility, but may not include carpets and floor coverings, kitchen fitout, BIRs, bathroom fitout, paint and more for a residential rental. I do not know what may be the case for retail. A total internal reno may be $50-80,000, and this may be on the depreciation schedule. I did an internal strata reno with the entire reno cost in the depreciation schedule. It may be that the amount spent on a reno and when this was done are the determining factors.

I suggest that you ask the depreciation company. The three companies you cite can do the job.

 

I found depreciator from Property Chat, and we used them last year. They are excellent.

It's quite rare for businesses to exist where you can ask them if it's worth engaging their services, but Depreciator (like BMT) are companies that won't take your money for their own personal gain unless it ALSO benefits you.

Give them a call to have a chat. @Depreciator

 

Hi,

Depending on the age of the building there may still be vast benefits to a deprecation schedule for a commercial property. It is always ideal to get a registered Quantity Surveyor to assess the property and let you know a rough estimate of depreciation that you can achieve.

You may be able to claim the original structure + any previous owner renovations, as long as you are the landlord and not the tenant.

 

Can one claim tenant's renovation, fitouts in a depreciation schedule or just the previous owner/landlord?

 

who owns it? its possible

 

You can only claim tenant fit-out once it has been abandoned. However, any prior fit-out bought with a property can be claimed, as long as it doesn't belong to the current tenant if they're still in place.

 

it still belongs to tenant atm as they are still trading and in a lease.

 

A good point. When training BMT staff on how to handle commercial enquiries, I'm always drumming into them to ask the question: "Who owns what?"

The problem is that a lot of owners aren't sure!

 

I see. No, you can't claim on things that other people/entities own. If they leave it behind, though ...

 

Yeah in a former busienss we acquired a fully fifted out office with workstations, IT cabling, partitioning, aircon and fire systems and SOOO much more (mezzanine and racking). BMT did the schedules and we picked up $4K a year in depreciation. The vendor didnt want to demo it as the going concern basis was being used. So we offerred NOTHING extra and picked up the bonus inclusions. On arrival we also had a full phone system. A bit like buying a house and finding a car in the garage.

Many commercial owners pick up fitouts on make good clauses at the end of a lease. It can sometimes pay to accept their kind gift. Most ask for $$$ but the cost to strip it and make good means its better to agree to leave it IF the fitout works. Offer nothing.

 

Something I have heard comment on is accountants will not always necessarily accept a depreciation report from a QS. If this happens you have effectively wasted your time. My own accountant mentioned she had lost a large client over the matter.

 

A QS is or should be an expert in depreciation. I have used a few and they provided good advice, explaining matters so that I could understand them. I am unable to see why an accountant rejects such advice.

 

Are you saying that it was your accountant who did the refusing here? Even if not, do you know what the reasons are for the accountant refusals you mentioned? Was it, say, an apparent lack of quality or detail with the depreciation schedule in question?

 

I had the discussion with my accountants around the context of a farming property that I’d recently purchased and having a report done. This was a few years ago. My accountants do accounts for farmers as a large part of what they do.

She mentioned the loss of a potential new corporate client who had purchased a large substantial tract of country and had an extensive QS report done which had cost the potential client tens of thousands. Her and her colleagues had a good look over the report and how it complied with the law. They advised against using it and the potential client went elsewhere. That’s about all I know and hence why I would be wary!

 

100% always get your own depreciation report for any commercial property you own. Many depreciation companies even offer you a guarantee that you will have the full savings of cost of the report in your first year of depreciation

 

If you have an old property where nothings been done since Adam was a pup then I don’t know if it’d be worth it. Usually they call and ask a few questions first so you get the general idea etc.

 

This is a common issue. Farms often include substantial value of improvements including fencing, hay sheds, water improvements (e.g dams, troughs, tanks etc), however there are rules that can prevent subsequent owners claiming depreciation on these assets if the previous owner claimed or was eligible to claim a deduction under s40f.

Despite this, I often see quantity surveyors include these amounts in their reports even though they are not eligible to claim them. They might include a disclaimer in the report in fine print, but once included in the report it then is up to the accountant to have the difficult conversation with he client. I try to get ahead of it by instructing the QS at the time they are preparing the report to exclude any deductions the client isn't eligible to claim.

 

Often it's bought for $1. In this case, does it have a depreciable value >$1 as it's identified as having a nominal value?

This differs markedly from the lessor paying peanuts for the fitout. In this instance, the fitout was a depreciable asset of the business that you purchased.

 

A bit later this year I will need a depreciation schedule. Are there any QS companies that are to be avoided or that are recommended? Or do they all provide a similar service?