Depreciation schedule

This isn't as big a deal for commercial property. As residential property did before 2017, plant and equipment reset their lifespans when the property changes hands. I.e., assets commonly held by the freehold owner such as air conditioning, lighting, hot water systems, fire safety equipment and sometimes flooring all get depreciated again for the new owner, regardless of age. A 100 m2 pre-1980s office could still have plant and equipment valued in the five figures. It won't necessarily be a goldmine, but will the owner end up with more money than before they had a depreciation schedule? The vast majority of the time, yes.

We're very careful with this. Prior to quoting for any farm work, we check whether the client qualifies as a primary producer and a Small Business Entity. If yes to both, SBE status trumps the Section 40-F rules. I.e., they're allowed to claim on previously owned fencing, fodder storage and water assets. We have been tested on this. Taking advantage of this is likely why we've seen a dramatic increase in the number of primary production facilties purchased by Small Business Entities.

If the contract says the plant and equipment was purchased for $1, we can only value it as such because it was agreed upon. There are extremely limited circumstances in which exceptions apply. Any capital works purchased are still able to be valued historically.

 

What is the treatment if the property is transferred to a trust?

 

Full transfer, stamp duty and everything? The above applies. Happens semi-regularly.

 

Death/divorce - no SD, partial transfer

 

Yes. The continuing party will be seen not to have been the owner of (for example) 50% of the assets' value, so, therefore, they are the new owner of half of each asset, as odd as that may sound.

 

Thanks, have you got a private ruling confirming this?

 

No, we sought clarification from one of the Assistant Commissioners at the ATO to clear this up, so there's no private ruling. It simply aligns with the legislation for Small Business Entities and the SBE explanatory memorandum where the entity is carrying on a primary production business. See also, for example, the detail on this page about claiming second-hand water assets under other provisions:

Water facilities | Australian Taxation Office

"Second-hand assets
If the water facility is a second-hand asset, special rules apply for:

• depreciation
• claiming a deduction under other provisions.

Depreciation
You can't claim a deduction for the depreciation of a second-hand water facility, unless you can prove that no one else has or can deduct an amount for the asset's depreciation.

Claiming under other provisions
Primary producers who are considered a small business entity may choose to use the small business simplified depreciation rules to claim a deduction for a second-hand asset."

I.e., if you choose to use those rules, the second-hand status becomes irrelevant, because there are no such restrictions in the SBE legislation.

 

An IP reno was done a few years ago, $40,000 or so. The reno had:
- electricals, PPs, switchboard, lights, smokies, switches;
- new kitchen and whitegoods;
- most of the bathroom, tiles, vanity, toilet;
- painting;
- carpet, lino done several years before the reno;
- new BIRs;
- a few new blinds;
- air conditioner; and
- sundry other minor works.
I did the project management, painting and a few other jobs. I engaged a sparky, a company to make the kitchen, a person to fitout the kitchen, plumber, tiler, BIR company and maybe others.

Are costs associated with the above included on a depreciation schedule? If not, which ones are excluded or included? I made quite a few trips from home to the IP. Are these travel costs allowed in the depreciation schedule?

 

All of the above will depreciate, except I can't comment on "sundry other minor works" because I don't know what they are. We do not include your travel costs.

 

Chris, thanks. The sundry bit includes minor expenses related to the reno. While it's a pity that travel costs cannot be included, by having DIY project management and painting I saved several thousand dollars.

 

Fair enough! As long as the cost-benefit equation is in your favour ...

 

Absolutely. Providing not too many things go wrong too seriously too often, I've found that the DIY approach works. Something always goes wrong.

One of the worst was a dreadful plumber who installed a meter the wrong way (I picked this up before he did the second connection), had a vanity out of true in three dimensions, and failed to add a little stand under the toilet pan. The latter meant that the toilet would not flush to the side. It was literally attempting to push **** uphill. They said three days to do the job, and I allowed about 10 for usual delays. I had to get anther plumber to fix the horrible work. This took a month, throwing the rest of the schedule out. The only good part was not paying the first plumber $1700 and paying the second one $800.

I can do the painting between other jobs or while waiting. Even if it takes me a month to paint I save $4-5000 and forego $2-2500 in rent. Carpentry can be done any time.

 

Wondering what your definition of a registered Quantity Surveyor is, as most companies mention a qualified Quantity Surveyor?
Is a registered Quantity Surveyor someone who simply has a Tax Practioners Board registration and performs quantity surveying skillsets, like tax depreciation.
Or is it actually someone who went to university and studied a bachelor degree in the appropriate course to become a quantity surveyor?

 

There is a range of qualifying degrees or overseas recognised equivalents which qualify for membership of the AIQS or RICS.

 

That's why I said appropriate course, as I have found in my investigations that different universities in different states have different names for the courses that qualify someone as a Quantity Surveyor.
But I have also found in my searching to find a good tax depreciation report provider, that there are people out there calling themselves Quantity Surveyors, but they do not have the appropriate qualifications as a quantity surveyor.
They have somehow gained themselves a TPB number from the tax practitioners board and now call themselves Quantity Surveyors.
So my question was, is this what they refer to as a "Registered Quantity Surveyor" compared to an actually "Qualified Quantity Surveyor"?
I am quite capable of doing my own BAS's and even put figures into Quickbooks, but that doesn't make me an accountant.

 

A registered QS needs to be a tax agent. With tax agents what people do is one in the office gets the licence and the firm becomes registered with unregistered people doing the work - some may actually be registered but seems many won't as it costs money and the don't 'need' to. That might have the qualifications though and could register if required.

That wouldn't work in the legal world so not sure what it works in the tax agent world.