Forum Replies Created
A tax break has never been my motivation to purchase anything. As Derek said, they’re ‘icing’. I like property purchases to stack up without factoring in tax breaks.
ScottNo Kay, you just would have had to have paid for it by June 30 to claim the cost on your 2004 return. We had well over 100 people paying for schedules Tueday and Wednesday this week. The report itself can be done anytime. Right now, we’re working on a 3 week turnaround time providing there are no access issues.
ScottLeigh I’m not sure exactly where Wimmera is, but we’re doing some Schedules in some pretty out of the way places of late.
And depending on the nature of the property you may not even need a QS – I can explain more about that.
I’m back in the office on Monday. Give me a call and I’ll see what we can do.
Scott – 1300 660033
Painting is a repair if you’ve been renting the property out. If you acquire a property and then paint it before renting it out the cost of that work becomes a ‘cost of acquisition’. It’s not even depreciable. The cost is added to your cost base for consideration in your CGT calculations upon sale. That’s why I always advise people to try and get a tenant into a property even at a reduced rent for 6 months or so before doing much to it.
Scott
Hi all,
Derek is of course right. My accountant advised me similarly when I replaced a hot water heater some years ago. But there may be some room to move.
If the current cooktop (or whatever) was beyond repair and had to be replaced, you could possibly argue that it is a repair. If you go down this road, the safest course of action would be to replace the cactus stove with a stove of a similar age and model i.e. visit a second hand shop.
The most important thing to remember is that you must not ‘improve’ the asset. By that I mean if you toss out that 10 year old upright St George cooker and replace it with a slick 900 wide Smeg cooktop and under bench over, then you have made a ‘capital improvement’ and as such you’d definitely need to depreciate it.
Yeah, I know there’s a huge grey area between those two scenarios. Common sense is the key. And always get an opinion from your accountant.
Remember also, if you opt to chuck out a functioning stove and upgrade, that stove you are chucking out has undeducted depreciation that can be claimed. If you’ve been depreciating it using the Prime Cost method (which hardly anyone does) you can claim 100% of the undepreciated portion when you dispose of the asset. If you’ve been using the Diminishing Value method, the original stove would stay in the Low Value Pool and keep depreciating. So yes, you’d have 2 stoves being depreciated simultaneously.
Scott
Yep. Very busy this time of year. At least it’s winter. We’re lucky that our slow season coincides with summer. Happy to answer any questions, whether they’re general or specific. Once you’ve got your head around a few key dates, depreciation is pretty straightforward.
Scott
A depreciation entitlement would have been factored into the financial projections given to you. Check what rate they have used for the building depreciation – Divison 43. They’ve possibly used the 4% rate for ‘short term accomodation’. I suspect that a unit in that property would not qualify for that rate, but I would need to know a bit more about the facilities in the particular unit in question. Chances are the rate should be 2.5%. That may put a decent dent in the projections.
Scott
Vicgirl,
Samples can only be very general. I’d rather not use them, but there’s an expectation that we provide some indicatives. Those samples were from actual jobs, but every job is different.
There are a huge number of variables that affect depreciation. We sat down a while ago and looked at what we would have to do to put together a really complete depreciation calculator. We’ve got lots of the software already built for our QSs to use, but having something investors could use for sufficiently accurate estimates was a huge job – we’ll get onto it during our off-season.
In answer to your question, depreciation keeps going till it runs out. Buildings can depreciate for either 25 years or 40 years depending on when they were built. Renovations carried out after Feb 26, 1992, depreciate for 40 years. Fixtures and fittings/depreciable assets depreciate over different periods of time depending on the effective life of the asset. the Low Value Pool speeds up depreciation.
All of the above may have confused you further. Call me and you can ask as many questions as you like. Being tax season, I’m in the office most of the time these days.
Scott – 1300 660033Any position this close to an election is irrelevant.
Damien,
Like Rugby I’ve got a mix of properties. While I’m drawing a salary and paying lots of tax I’m happy to have negatively geared properties in great spots. One IP I’ve got in Sydney is worth $800K and rents out for $500pw. On the face of it, a dumb investment.
It’s a renovated 1900 terrace in Annandale, though (that’s where people who can’t afford Balmain buy). Over the last 5 years, it has shuffled up in value by an average of around $70K per year. And there’s good depreciation in the renovation i.e. a non-cash deduction.
I’ll hang onto it for as long as I’m paying tax. Of course, having said all that I freely admit I’m not the most savvy of investors – I probably need to read some books on investing.
None of this helps Swampy, though. Sorry. One of the brokers will sort you out.Scott
I’ll get in touch with my Port Macquarie QS and see if he knows anyone. He obviously comes into contact with most of the PMs up there, so he should know who seems switched on.
Scott – 1300 660033
Not sure of the relevance of a 1515.
The work you have done on the property will be regarded as a ‘cost of aquisition’. It won’t be depreciable, but will add to your cost base for CGT calculations down the track. Pity you couldn’t have rented the place out for 6 months – even at a low rent.
Scott
Try this site http://www.depreciator.com.au
Or give me a call and I’ll give you a rundown on depreciation.
Scott – 1300 660033
It’s a coastal town, so that’s in it’s favour. Of course, Bass Strait would be a bit chilly for much of the year. I believe Burnie used to be semi industrial but they’ve lost a bit of industry. I imagine their trying to attract tourists as much of Tasmania is.
I own a little block of units in Somerset – 5 klms outside Burnie. It’s across the road from the water. I bought it 18 months ago. The block was a bit tatty and untenanted. Getting tenants was a hard slog – the tenant pool is neither plentiful nor high quality at the lower price range. I’ve now got 6 tenants and the block looks better. It’s increased in value by around 60%. I’ve heard that prices have stagnated in the area – mainland investors were driving the demand.
Best idea would be to talk to some property managers down there.
Scott
I’d say it would be hard to justify the expense of a Schedule. You know the cost of the stove. Give me a call if you’d like to talk through the other assets. There will be enough depreciation there to make self assessment of the assets worth doing. Do you have a reasonable accountant?
Scott
Hi Nathan,
I was just speaking to one of our SA guys. That region is closer to Adelaide than I thought. Servicing it is no problem. Of course, we’d still need to make sure there will be sufficient depreciation found to justify the cost to you.
Scott – 1300 660033
Hi Nathan,
For some reason, QSs are in short supply in SA. I’ve got a couple in Adelaide, one of whom does regular trips out of town – I think he’s in Mildura right now.There has to be plenty of depreciation in an IP to justify the travel cost of a QS. If it’s an unrenovated pre 85 build, there won’t be enough there. We won’t do a Schedule unless we know we’re going to find decent depreciation.
All is not lost, though. You are allowed to self assess assets. It’s even possible to get estimates of construction costs from ‘appropriately qualified’ locals and then apply the relevant tax rules to these estimates. If you’ve got a reasonable accountant, you can sort out depreciation on remote properties for a few hundred dollars. Not sure whether the above makes sense or not.
In the last week, I’ve talked half a dozen Forum Members through this. It’s not too hard, and there’s generally enough depreciation there to claim to make it well worth doing. Please feel free to call me next week.
Scott – Depreciator 1300 660033
If they’re new and they’ve got uninterrupted views, I’m wondering if they’re in the Observatory. It’s a great building in a great spot.
I exchange on something there shortly that I bought off the plan. It has proven to be a great punt – 30% gain on bank val since exchange 2 years ago. Having said that, I’m not trying to flog it.
I was up there a week ago to do a pre-settlement inspection. The amount of building activity in town is amazing. There are numerous blocks going up, so position i.e. proximity to the beach and town, are critical. The usage intention of the property is also important.
From what I can gather, lots of the blocks going up are aimed at owner occupiers – heaps of retirees up there. The block I bought into is aimed solely at the holiday market. Agents have said there has been a net drain of holiday accomodation as the old walk-up apartments have been bulldozed to make way for owner occupier blocks.
There are plenty of apartments on the market. Off-the-plan sales are still happening. Some apartments are for sale in finished buildings. Others are being on-sold prior to settlement.
So, from my observation:
1. Supply up there would be outstripping demand.
2. The apartment market in Port M may be suffering irrationally because apartments in Sydney are out of favour – lots of Port buyers live in Sydney.
3. It’s winter, and Port is largely a holiday town.I’m assuming your apartments haven’t dropped in value, but I’m not surprised it’s proving tough to sell them.
Where are the apartments?
Scott
There must be some other things all you savvy investors out there are planning prior to June 30?
