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It doesn't happen anywhere, except with commercial property.
Of course, there is an obligation on the part of vendors to provide construction costs if they know them, but few do.Suzie, cars etc have book values, so it's easy to know what they are worth for depreciation purposes. Buildings are tougher, and the ATO has been saying to accountants for years that they cannot have a stab at construction costs because they don't have the relevant qualifications.
If the builder can get actual costs, your accountant can use them.
We've naturally got guys in Melbourne.
The building consists of the subfloor, walls, roof, plumbing, wiring, bathroom fitout, kitchen fitout, floorboards – basically everything that will last 40 or so years with normal use. Fences, driveways, retaining walls etc are also 'building', depending on when they were done. Architect, engineer etc fees can also be included.
Scott"An easy solution is to offer the tenant a couple of nights free accommodation in a near by hotel for a weekend and do the painting then. Alternatively find out if the tenant is taking any long weekends away or holidays and do the painting whilst there gone."
I've known people to do this and then be accused of damaging the tenant's property. Much easier to paint etc between tenants. Usually cheaper, too, because the job is quicker when the place is empty.
As for claiming the painting as a deduction vs a repair, much depends on the extent of the painting you intend doing, the state the property was in when you bought it, and the length of time it has been tenanted under your ownership.Scott
Ao, to answer your question:
"just wondering if there's any significant differences between depreciation of brand-new properties and refurbished properties?"
It depends entirely on the extent of the refurbishment and the nature of the work done. A renovation in a capital city can easily cost more than the price of a new project home.
Scott
Sq, if you have previously bought older properties – pre 85 built – the only depreciation in them has been in the Assets (fixtures and fittings). According to the ATO, it does not take any particular expertise to estimate the value of Assets.
With a newer property, though, somebody will have to estimate how much it cost to build. The ATO has been telling accountants for some years that cannot do this. A QS is the person best trained to do this.
If the property is brand new and you have a builder's contract with a construction price, your accountant may be able to work with it.
ScottCadan,
With the building, you need to pro rata the claim for the days in the year when the property was available to rent.
The Assets (fixtures and fittings) are ascribed a value on the first available to let date.
Scott
Someone (a QS would be ideal) will have to put a value on that 3 year old carpet.
Often, when people purchase commercial property there is a written-down value for Assets in the contract and the purchaser is stuck with them. This rarely happens with residential property.
So a QS will work out a value for the carpet, the stove, the air con, the curtains etc on the day the property is first available to be let – in your case probably the day after settlement.
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http://www.depreciator.com.auDevo, I’m not exactly sure what you’re asking.
If you have, say, carpet and you depreciate it, when the value of the carpet gets to zero, that’s it i.e. you’ve written it off in full and there is no more to claim on that carpet.
Then when you put new carpet in, you’ll start to depreciate that.
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http://www.depreciator.com.auI suspect it’s not all that hard to find a term deposit rate at a bank that is higher than 6.25%.
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http://www.depreciator.com.auI wouldn’t use depreciation as something that really dictates a purchase decision. I sort of see it as icing on the cake. Yes, it can assist with affordability though. The new unit will give you more depreciation, but many people will say you’re better off with the home because you’re buying a plot of land and it’s land that appreciates.
I would tell the forum a bit more about what you’re looking at i.e. location, price, possible rent etc etc.
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http://www.depreciator.com.auIt doesn’t really ‘work differently’ for homes vs units. Depending on when it was built, the building can be depreciated, as can the Assets (fixtures and fittings). If you mean which will yield more depreciation, a new unit will tend to give more than an old home. That’s a huge generalisation, but with more specifics from you I can be more specific in return.
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http://www.depreciator.com.auCherry Pro, just thinking a bit more about this:
Interest costs $29000 pa
Other property expenses $6500 pa
ie. total costs $35500Rent $18500 pa
Depreciation $17000I think you might be a bit confused. Depreciation is just another ‘outgoing’, or cost. It’s a tax deduction you treat the same as rates, management fees etc.
But it is a ‘non-cash deduction’. With rates, for example, you pay out money every year and then try and claim some back. With depreciation, you locked in your entitlement when you bought the property. So all you do every year is claim that depreciation.
Give me a call if that doesn’t make sense.
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http://www.depreciator.com.auYou need a Quantity Surveyor who understands depreciation – many don’t.
A QS will estimate the cost of that reno on 03. You will be able to write it off at 2.5%.
Then the QS will then put a value the Assets (appliances, carpet etc) as of the first available to let date i.e. when you made the property available to let.
Some of these Assets will be written off straightaway – those under $300.
Assets valued between $300 and $1,000 may go into the Low Value Pool and get depreciated fairly rapidly.
Assets over $1,000 will be written down according to their ATO determined Effective Life.
The QS will put everything in a report that states clearly how much depreciation you can claim every year.
You just give the report to your account.
Easy.
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http://www.depreciator.com.auJulie, kitchens are building i.e.2.5%.
$17,000 depreciation Cherry Pro? That must be a pretty flash property. Where did you get that figure?
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http://www.depreciator.com.auGuardian Partners are at Gosford. Bit of a drive, but Michael Armstrong is very good with property.
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http://www.depreciator.com.auRob, if you’re a tradie, talk to your accountant. Do you have a company? Maybe you can do something about invoicing for your labour. Either way, I suspect you don’t need a QS this time. There will depreciation there to claim, but you’ll have the costs.
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http://www.depreciator.com.auI spoke to a forestry guy a few years ago and he said it’s a bit of a myth. Apparently there was a type of decking that had grooves put in one face to disguise checking i.e. marks. People thought it was put there to stop bowing or keep it dry underneath. So then there was an expectation that all decking had it. He said guys who work in timber retail believe the myth, too.
I don’t like seeing the grooves, but that’s a personal preference.
At my PPOR, I screwed the decking down with stainless steel screws – I may need access underneath it at some stage.
I finished it with a product calle Aussie Clear – I’m 99% sure that was the name. It’s been good so far and is easy to apply. It’s been down a year and is due for another coat soon.
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http://www.depreciator.com.auYes, but if you hold the property for longer than 12 months, you get the 50% CGT discount.
Devo, some of that $150K will be ‘building’ and some will be Assets (fixtures and fittings). Roughly speaking, the building component may be $140K. That’s going to depreciate at 2.5%pa i.e. $3,500pa. The remaining $10K may be Assets. They depreciate more quickly than the building. In Year 1, you may get, say, $2,500 in depreciation from the Assets. These are just rough estimates to give you an idea of how it works.
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http://www.depreciator.com.auI tend to agree. I havejust read ‘0 – 130’ and it seems that 10% or 20% deposit is required to make most IP’s CF+. Where does the average single income family with a mortgage, kids and a car loan find between $10k and $50k each time to buy an IP, let alone legals and stamp dutyYou’ll find that when Steve wrote that book (5 years ago?) the properties he was picking up in regional towns were pretty cheap. The market has moved alot since he wrote the first book, so it’s a good idea to read the following book.
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http://www.depreciator.com.auI remember someone saying once that when big retailers move into a town it’s a good sign because they have done lots of research and reckon the town is a goer.
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