Forum Replies Created
I think there are only 2 valuers in town. They’d both be on the panels of most lenders. And they’re probably overworked right now – lots of activity up there.
I’d say the broker in question is probably being pretty conscientious right now.
There was no excuse. He knew the unit number and he knew it was on the 3rd floor, south east corner.
The painters were finishing off last week and the access wasn’t an issue.
Thanks Redwing (and Derek). Always happy to provide information. I’m learning a fair bit about things other than depreciation in visiting this site.
Scott
Apex aren’t cheap, XXX. But they’re good. I think using the cheapest QS you can find makes as much sense as using the cheapest accountant you can find. (And I didn’t really take offence.)
When we talk about commercial property, the size and range of property types is huge – yesterday, I was contacted by someone with a big crayfish farm south of Darwin. If it becomes a job, I’ll be sending Apex to Darwin.
If any of you have a shop, or a little factory/warehouse (3 walls, a roller door and a mezanine), any QS who specialises in tax work and is up to date with the rules would be able to handle it. For bigger jobs, you need a specialist.
[email protected] 1300 660033
We had a client audited in April – our first one ever. They called in his Tax Depreciation Schedule and asked him a couple of questions. He sent me an e-mail with the ATO questions. The questions concerned those grey areas that we hate (many of which will be cleared up with the changes coming into play on July 1). I wrote a response that included reference to ATO Interpretative Decisions we base our schedules on and the ATO said this week it was fine.
[email protected] 1300 660033
Seminar is in NSW, but attendees will no doubt have properties all over the place.
See Tinkerbell, told you there’d be a range of responses.
What works for one tenant won’t necessarily work for another. What works for one investor may not work for another. Same goes for property managers. We’re dealing with people – too many variables.
I’ve always used property managers and they are rewarded as are some tenants. I keep my tenants at arms length. I reward either party when they exceed my expectations.
Gee Henry, I don’t think those tenants felt I regarded them as ‘stupid or inadequate’. In fact I’m not sure whether any smart investor would take their tenants for granted. But maybe I did unwittingly offend those tenants and I’m too obtuse to realise it? Still, the fact that they’d being paying monthly after the expiry of a lease and asked whether they could go on a lease again meant that whatever I did achieved the desired result.
Okay Redwing.
I’ll bung something at the bottom of the posts – just wary about appearing to advertise.
You’ll give Deppro a call? Good on you XXX. And to think I spent all that time answering your questions…
There is a company I outsource much of our commercial tax work to (and they in turn send us their residential work). They’re called Apex.
<<edited>>
In the last 6 months, Apex have done commercial schedules for me in WA, SA, Vic, NSW and QLD. They’ve done everything from office buildings to caravan parks.
I believe that commercial depreciation is much trickier than residential. They know a lot about depreciation on commercial buildings <<edited>, but they’re not cheap. I use them because they’re good. Think of them as the QSs used by other QSs.
Depreciation on commercial properties can be huge. We recently had a client who purchased an $8m caravan park sounth of Wollongong. Year 1 depreciation was $392,000.
If you have questions, call Michael at Apex on 02 8243 5790. <<edited>>
Scott – Depreciator 1300 660033
Gee, this will be a contentious thread, Tinkerbell – it was last time this issue came up.
Rewarding someone for paying their rent is like rewarding them for what they should do anyway. I don’t know whether this makes sense.
I reward tenants if they go ‘above and beyond the call’. For example, I have a tenant in a block of 6 units that I own. She is an avid gardener. At her local nursery I put down $40 per month so she can buy supplies. The grounds look great. She’ll stay there long term and it helps attract other tenants.
I’ve got tenants in a Sydney property who have been there for 18 months. I recently got my property manager to write to them and let them know that in recognition of the fact that they always pay their rent on time etc I’m not going to increase the rent. Of course, I wasn’t going to anyway – too many vacancies nearby. But they’re chuffed and think they’ve been rewarded.
For another tenant who paid well, I put in a heater last month – his lease was due to expire. It cost less than $300 so it’s claimable in full this year. The tenant signed up for another 6 months. And of course, when he does leave, the heater will help attract another tenant.
I wouldn’t send someone a birthday gift – too personal.
The main thing is to make sure any communication goes through your property manager. Stay out of it yourself.
Scott
4 things:
1. I forgot to mention we give a discount to members of this forum – $660 instead of $715. Just mention ‘Scott said it was okay’ to whoever answers the phone.
2. James, that $300 price from Napiers would be for a unit and they would have been the QS on that building project. For them to generate a report, they wouldn’t have to leave the office, just press a few buttons. It’s called a ‘repeat’. Out of curiosity, I recently got a quote from Napiers for a unit in Narrabeen, Sydney, and the price was $1,100+GST.
3. SuperTed. No Quantity Surveyor can give that guarantee. Part of the problem is that there are so many grey areas in depreciation. The best way to ensure a report passes ATO scrutiny is to be up to date with the ever shifting ATO rules. We are on the phone to them every day. I’ve met informally with one of their staff and asked them what they look for when they audit a schedule (so I can pick a crook one as quickly as they can). I have a ‘compliance’ person here who monitors ATO Interpretative Decisions etc. We use external consultant tax accountants to run our stance on issues past. We’re also the depreciation provider for the Count Wealth Group, Ray White Group and Century 21. Count Wealth is a publically listed group of 600 accountants/planners. As you can appreciate, they did a fair bit of due diligence on us and our report. Last month I spoke at their National Conference in Canberra. Our product and service is also better than any other company (though admittedly with the QS industry the service bar is set very low). Remember, most QSs do tax work part time. Oh, there are many places where we are cheaper than anyone else e.g. Albury.
4. Jimbo James. That sounds like an odd disclaimer. We tell people that our report does not constitute ‘advice’. Remember, when you take delivery of a Tax Depreciation Schedule and use it, you assume responsibility for it . Similarly, when you sign your tax return prepared by your accountant you assume responsibility for it. You are the ATO’s client, not your accountant or your Quantity Surveyor.
In short, I’ve always said there are cheaper reports out there in some markets. We do hundreds every month all over Australia and I don’t compete on price. If somebody wants to save a couple of hundred tax deductible dollars and end up with a sub standard report that an accountant will have to fix, that’s their decision.
Happy tax season, everyone.
Scott
The short answer is that you can depreciate what you paid for. Commercial depreciation is trickier than residential and your question is a bit confusing, but if I put down a few scenarios maybe one will cover your situation. (Bear in mind there are probably endless scenarios.)
1. You buy a property already fitted out as a cafe = you depreciate the fitout.
2. You buy a property and then fit it out = you depreciate the fitout.
3. You sell the property with the fitout = the new owner depreciates the fitout. (Often with commercial properties there are written down values in the sale contract.)
4. You own a property and a tenant fits it out = the tenant depreciates the fitout.
5. The tenant leaves and the fitout stays = the tenant still owns the fitout. He’d be within his rights to take it. (Often removal of a fitout and restoration to pre exsiting condition is part of a lease.)
6. The tenant leaves and owes the landlord $10K. The landlord says forget the 10K, I’ll keep the fitout = the landlord depreciates the fitout. The $10K would be spread across the assets.
7. The tenant goes bust and the owner buys the fitout for $1 = the owner can depreciate that dollar.
They’re a few VERY GENERAL scenarios.
Regards,
Scott
Adam, I can tell you the exact price of a Tax Depreciation Schedule in Cairns – $715 GST inc.
That’s the same price we charge for Canberra, Darwin and Albury (+ loads of other places).
Can you get cheaper schedules? Yep. I see them all the time. Will they pass scrutiny by the ATO? Not always.
As for an inspection this week, you’re pushing it. Best act quickly.
Scott – 1300 660033
It depends on the extent of the work and how switched on a person’s accountant is.
Let’s say someone has a pre 85 property that they do a quick reno on. So all they do is chuck out the stove and some carpet and throw a bit of paint around. In this instance, much as I’d like to take their money, they’d be wasting their time paying for a Schedule. They can put a realistic value on the items being thrown out and their accountant will be able to work with receipts for new items.
At the other end of the scale, let’s say someone is doing a big structural reno on a post 85 property. It’s tricky, but if they’re disposing of walls, roof, windows etc, they should be able to claim a write-off on these items. We’d have to do a full disposal schedule. Imagine owning a post 85 house and knocking it over and claiming the residual depreciation in the structure and assets as an immediate write-off! I’ve been toying with the idea of doing something like this but I would seek a private ATO ruling before doing it.
If a schedule is done prior to a renovation, items that will be disposed of need to be kept out of the Low Value Pool to be written-off immediately.
One thing to be aware of is that the property needs to have been earning an income before you do anything. Work done after purchase and prior to renting is regarded as a cost of aquisition and as such it increases the cost base for CGT calculations.
Remember also, that it’s alwasy best to try and claim work as repairs/maintenance rather than try to depreciate it.
And finally don’t try to claim anything for your own labour – the ATO are a wake-up to that one because it’s something lots of seminars guys have been promoting.
Hope all that makes sense.
Yep, keep your receipts.
The ATO reasonably expect someone who renovates an investment property to only claim for what they have paid for. Receipts are proof of money spent. You can’t claim for your own labour and if you have tradesmen who work for cash without paperwork you won’t be able to claim what you’ve paid them.
Where possible, try and claim work as repairs and maintenance rather than depreciate it.
Redwing,
Mango trees have a 30 year effective life.
ScottNo, ‘Hotvaluer’, the underlying value of an asset is not at all the same as market value. This distinction is particularly relevant in country towns. But you have indicated you aren’t interested in this discussion any longer. Good luck.
Hi Marisa,
There are lots of cases where a depreciation schedule wouldn’t be required:
As Rob said, there may be no depreciation available. Let’s say you own an older (pre 85) unrenovated house and you lived in for 10 years before renting it it out. There wouldn’t be much depreciation left to claim.
Or if you buy an old, unrenovated property with few assets, you’d probably be wasting your time getting a Tax Depreciation Schedule done – the cost of the Schedule would outweigh the benefits. The ATO will let you (or your accountant) self assess the value of depreciable assets. If you’re sensible, you won’t get into trouble.
To take Redwing’s point, if you have an older property and you renovate it, the renovation is depreciable. If you keep all your receipts and have a reasonable accountant, you won’t need a Schedule.
They’re a few scenarios.
Scott
I said in a post some time ago that we were getting lots of calls from people who had invested in Mt Isa. Sure, they were picking up properties with decent yields, but what concerned me was the underlying value of the assets. If the block was worth, say, $20K, and the house $40K, paying $80K for it didn’t make much sense to me even if it was slightly +cf. But that’s just how I view things – I may get shot down in flames in minutes. I think part of the evaluation process when sizing up a prospective purchase should always concern the underlying value of the asset.
ScottI don’t see why not, but I’ll need to confirm. If you’ve entered into a contract to pay, taken delivery of something, and installed it in a property, you should be able to depreciate it. There’s a logic to this. Having said that, ATO logic isn’t sometimes different from yours or mine. Can you send me a PM and remind me to check on this one?
ScottThey are Misty, but it would depend on how they’re being used and the number of trees. If it’s a house on an acreage and there are just a couple of trees whose fruit is consumed by the tenant, you’d be pushing it. If it’s a business and there is an orchard then the trees would theoretically be an income producing asset. Grape vines are treated similarly. Off the top of my head, I don’t knoe the effective life of either. If I remember (we’re getting very busy), I’ll do some digging on Monday.
Scott
