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Hi Kev,
You’re going to have to rewrite that second question. I can’t decipher it.
Your nickname – Geysertown – suggests that you are in NZ? If so, send me an e-mail and I’ll be able to steer you toward someone who will be able to answer your rewritten question.
ScottTax Depreciation Schedules
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http://www.depreciator.com.auThey’re probably not much different from many of the other groups around who are selling developer stock. They have been around for a fair while, which is a point in their favour. I have heard that they are a bit choosy about what developers they deal with. Cameron Bird would sell quite often to existing clients, so they would be careful about burning them.
I bought a furnished holiday unit in Port Macquarie through them. Yep, very lazy of me. I exchanged at $330K off the plan and the bank valued it on settlement in June last year at $460K. The gain was due to the property boom up there, not my cleverness – I did no research at all before buying. My main reason for buying the place was to have somewhere to take the kids for holidays, so it was a lifestyle decision more than anything else.
Depreciation this year is $14,000. So yes, depreciation helped the purchase stack up.
The quality of the building is excellent – and believe me, I’ve seen some shockers. Cameron Bird had nothing to do with the build quality. That was down to the developer and the builder.
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http://www.depreciator.com.auLook no further.
We’ve got 70 guys around the country and do plenty of schedules on the GC.
Everything is co-ordinated from Head Office.
Scott
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http://www.depreciator.com.auDuring the 28 days breathing space suggested by Steve, it would be a good idea to try and get the neighbour on-side. It won’t affect the issue at hand because now it is in the hands of the council and they need to follow process. It may, however, stop the neighbour looking for other issues to pick a fight over.
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http://www.depreciator.com.auIn addition to an entire newsletter on the fascinating nuances of depreciation, I think some space could be given sometime to helping people decide when to sell. Or at least helping them acknowledge that it’s okay to sell. Every client of ours I have even spoken to says: ‘I’m never selling.’ It’s sort of like a mantra and I can imagine investors sitting in circles chanting: ‘Never sell. Never sell. Never sell…’
The reality is that selling can make sense for all sorts of reasons.
ScottTax Depreciation Schedules
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http://www.depreciator.com.auI’d devote a whole newsletter to depreciation.
Tax Depreciation Schedules
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http://www.depreciator.com.auBest idea to get a considered response may be to give a bit more info.
Where is Ouyen?
How big is it?
Is it a single industry town?
How has the population (number and demographic) changed over the last few years?
etc, etc.
Of course the obvious question is why are there so many houses at that price available in that town? Who is bailing?
In other words, why does this town stack up for you?
If you’ve just searched for: ‘Properties in Vic between $50K and $80K’, you’re punting.
When I have bought regional properties, I have looked for towns that appear sound and then looked for properties within those towns.
But this is just the way I do things.
ScottTax Depreciation Schedules
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http://www.depreciator.com.auIt’s good that they’re going to meet. Make sure it’s in daylight. You might get a bit knocked off the bill.
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http://www.depreciator.com.auDemo guys tend to be pretty cavalier – that’s a nice way of putting it.
If they did what was asked of them i.e. clear the site, and the fence fell down a few days afterwards, forget it.
As for compacting the soil, if you specifically asked them to do this, they should have done it. I’m guessing you didn’t specifically request it.
Demo guys come and go pretty quickly. With big machines. They don’t muck around. I wouldn’t fancy your chances of negotiating any compensation with any of the demo guys I’ve met- they might come back and do a bit more demolishing.
Of greater concern to you is that you and your neighbour have a damaged asbestos fence to get rid of.
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http://www.depreciator.com.au‘Hard landscaping’ – concrete paths, retaining walls, paving etc – are depreciable. ‘Soft landscaping’ – plants, turf, dirt – aren’t.
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http://www.depreciator.com.auThanks Wayne.
Yes, we have great systems, but we haven’t found a way to eliminate people from the process.
On any one job there may be an accountant involved, a client, a tenant, a property manager, a QS and our in-house staff.
There are lots of points where a job can go off the rails. And about one in every hundred do. Usually, we get them back on the rails before anybody has noticed.
Scott
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http://www.depreciator.com.auJust curious, Rhett. Did you attend a seminar in London and buy that apartment? I know there was a group flogging Melbourne apartments at seminars over there. Quite a few expats bought them.
You’re probably as much a victim of the market as the developer. If the market was still booming, you may be sitting on a profit and be congratulating yourself on your cleverness. It’s no consolation, but we have lots of clients in a similar position to you. Some opt to hold, some are forced to sell. We had one client who had to settle on a few off the plan properties that were worth way less than the sale price. He had to sell his home. At least you aren’t being forced to sell.
Selling would mean you crystallize the loss, which is a bloody hard thing to do. At least the profit on the renovated flat will cover much of the loss. Which is great!
Holding it will be tough if you live in Melbourne because every time you see those buildings at Southback your stomach will churn. And they’re pretty hard to miss. More are being built, too, so supply is going to outweigh demand for some years.
Is moving back in with the parents for a while an option till you get back on your feet? The buy/renovate/sell strategy has worked for you, but be aware that it’s tougher to do it in the current market. Still worth a try, though. If you’ve done it once, you’ll know a few shortcuts.
ScottTax Depreciation Schedules
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http://www.depreciator.com.auI couldn’t come down quite that low. Quantity Surveyors are expensive, but that’s the way we run the business. June 30 should’t be a problem if there are no access issues.
I’ll send you an e-mail regarding price.
ScottAre Quantity Surveyors worth it? Depends largely on the age of the property and the projected return.
Of course, you’re aware that some companies don’t use Quantity Surveyors to carry out inspections. Best Practice’ from the AIQS (Australian Institute of Quantity Surveyors) perspective is for a QS to visit the site and for a QS (ideally the same one) to cost the building work. The AIQS has a draft Practice Statement circulating about this and they will be communicating their stand to the ATO.
On a 95 house and a 99 house you will get plenty of depreciation. And the fee is tax deductible!Tax Depreciation Schedules
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http://www.depreciator.com.auOf course I love June because that’s when we have lots of people calling up to pay for their Tax Depreciation Schedules as they can can claim the cost of the schedule back in July as a 100% deduction.
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http://www.depreciator.com.auHi Paul,
Read carefully what I said:
So that 10 year old air conditioner needs to be given a ‘written-down value’. Using the effective life is one way of doing this, but it may not be the best way from your perspective.So, what would be the best way from your perspective? Let’s say you buy today a 20 year old home unit. In the kitchen, is a wall oven. Now that wall oven has been there for 20 years and ovens have a 12 year effective life. Does that mean the oven has no value? Not at all. You paid for that oven. If there was just a hole in the wall theoretically the price of the unit would have been reduced.
So a QS needs to look at that 20 year old oven and determine a value for it. Essentially, the QS needs to work out what it would cost to replace that oven with an oven of the same model in the same condition, a ‘second hand replacement value’, if you like. It may only be a few hundred dollars, but you might as well grab it.
Your carpet I gather was $1,000 laid new 10 years ago? As you said, carpet has a 10 year effective life. Does that mean your carpet has no value now? Of course not. You paid for it in the purchase price of the property. If the carpet was a reasonable quality originally and if it has been looked after it will have a value. Again, the QS needs to ascribe a ‘second hand replacement value’ to that carpet.
Any item with a starting price of under $300 on the first available to let date is claimed in full in the first year e.g. your pump.
Any assets with a value of between $300 and $1,000 go into the Low Value Pool. The Pool depreciates at 18.75% in the first year and 37.5% per year after that.
I’m afraid your QS really hasn’t been terribly helpful. At least you got a construction price for the house out of him! Under the self assessment rules, you can put your own values on the air con, carpet ets.
If any of the above doesn’t make sense, please call.
Scott
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http://www.depreciator.com.auDespite my best efforts of explaining things to them very slowly, journos keep getting things half right. Sigh.
Here we go again:1. It’s only depreciation claimed on the building that impacts upon the capital gain. Depreciation claimed on the fixtures and fittings doesn’t come into it.
2. So if you have claimed, say. $10,000 in building depreciation over 3 years of ownership, then you effectively pay CGT on half of this (remember, the 50% CGT discount for assets held longer than 1 year).
3. Here’s the kicker. On any property purchased after May 13, 1997, you need to deduct the eligible building depreciation from the cost base upon sale whether you have claimed it or not.Very few accountants are aware of this.
So if you don’t claim it and the ATO quiz you on your CGT calculations, you’ll get hit anyway.Scott
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http://www.depreciator.com.auHi Paul,
I’m a little bit confused about what you’ve got from the QS.
Surely the QS has given you a report that tells you what you can claim for the next 10-20 years or so? If you’re having to work out this, he’s only done part of the job. Hope it didn’t cost much.
He would have put a construction cost on the building itself at the time it was built. This depreciates at 2.5% per annum for 40 years from construction. So if it was built in 1995, it will depreciate until 2035. That’s the easy part.
Then there are the Fixtures and Fittings. These need to be given a value on the first available to let date i.e. when you put the property on the rental market. So that 10 year old air conditioner needs to be given a ‘written-down value’. Using the effective life is one way of doing this, but it may not be the best way from your perspective. Different air con units have different effective lives, too. Split systems up to 20KW have an effective life of 10 years. A room unit has a 10 year life, too. Ducted systems are more complicated because the ducting is part of the building.
I’m happy to look at what you’ve got and give you some pointed questions for the QS so you get something you can use.
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http://www.depreciator.com.auJen,
Neale is right. The product should essentially be the same. The rules are pretty clear, and we follow them.
When it comes to estimating construction costs, inspection by a Quantity Surveyor is Best Practice according to the AIQS (Australian Institute of Quantity Surveyors). The ATO also obviously prefer this, though it’s not their place to regulate an industry (much as I wish they would).
Now, Quantity Surveyors are 4 year trained professionals. Their hourly rate as a consequence is pretty high. If a Tax Depreciation Schedule is costing $400 and the building cost needs to be estimated for that job, there is a possibility that a QS won’t be going on site, despite what you are told on the phone.
And this year the ATO have told us they are going to be auditing building cost estimates.
Always remember, that if you commission, pay for, and use a Tax Depreciation Schedule you accept responsibility for it. You are the ATO’s client, not the QS.
I reckon saving a couple of hundred tax deductible dollars is false economy if it involves using someone who takes short cuts.
I’m sure Neale would agree. As would other reputable Tax Depreciation Schedule suppliers.
Scott
PS Of course, schedules on brand new units can often be obtained cheaply because there will invariably be a QS group on the project and they will know all the actual costs.Tax Depreciation Schedules
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http://www.depreciator.com.auHi Tim,
The appropriate weekly rent for a property would be largely dictated by the market i.e. what are tenants willing to pay for similar properties in the area. Talk to some property managers in the area.
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