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Not sure whether there’s any surf, Robo. I’ve never been there. It’s on the north coast.
I’m facing the same dilemma. I’ve got a property in Tasmania and my neighbour is keen to sell – we’re having a boundary dispute and I’ve worn them down. The price they’re asking is more than it’s worth, but if I buy it I’ll have a 2,000+ sqm site across the road from the beach. I’m thinking of a future development (in time for the next boom). For the sake of an extra $10K I’ll be buying it.
ScottI’ll be selling a +cf property later this year because I want to buy a fishing boat that will lose value the moment it hits the water.
How’s that for a lousy investment decision.Gee, another QS question.
My price (Depreciator) is $715 GST inc. That’s for any type of residential property in all capital cities (except Hobart). I also have guys on the ground in lots of regional centres and the price is the same – Cairns, Townsville, Bundaberg, Rockhampton, Gladstone, the Sunshine, Gold and Tweed Coasts, Coffs Harbour etc etc.
How about for readers of this forum I give a discount? Let’s say $660 GST inc for any areas where I have guys on the ground. You’ll have to mention this offer to the boys when any of you call.
Now, you can get cheaper schedules in some places if you shop around. I saw one yesterday. It was wrong and wouldn’t pass an audit. It was also incomplete, so that client’s accountant would have had to spend 45 minutes finishing it. And guess who pays for that?
As for developers schedules, yes they are often more generous than ones prepared by QSs. Why is that? Because often whoever is marketing that property needs the schedule to be generous so the property look more attractive for potential purchasers. These schedules won’t pass an audit either. Now, if a schedule has mistakes in it, who gets into strife? The taxpayer – you. The ATO holds you responsible because you chose to use the schedule.
We’ve got an open offer with all our clients that if they have a schedule prepared by a developer, we’ll look at it and point out the errors so they can get the developer to fix them. We do this for no charge.
Back to the price, remember it’s 100% deductible, so saving a few dollars doesn’t really justify the risk if you end up with something that is going to possibly get you into trouble.
Call the boys if you have any questions 1300 660033. They’ll also be able to work out over the phone whether there is enough depreciation in your property to make it worthwhile commissioning a schedule.
ScottI’d give Depreciator a call. But then I’m biased. I’ve got 70+ Quantity Surveyors in my network and cover all capital cities + lots of regional areas. Nobody else offers this coverage. And we’ve got a guarantee! All we do is depreciation, too, so we’re up to speed on all the latest rule changes. There are 4 guys waiting right now to answer any questions you may have – 1300 660033.
ScottRe: the Reno Kings. From what I recall one key to their method of adding value is being able to reconfigure a house and find an extra bedroom, or bung a deck on and add some french doors. It’s easier to do this with ‘queenslanders’ i.e. timber houses. So if you live in, say, Sydney where housing stock tends to be of brick construction, you may find some of their tactics a bit too expensive.
There is still lots of other useful advice on adding value, though.Hi Taz,
I reckon Derek covered most of what I would have said. A note on Structural Improvements (renovations) – they can be depreciated if they were carried out after February 26, 1992. This can include exterior work, too – driveways etc. Getting a date on improvements made by a previous owner can be tricky.
The cost of getting a Tax Depreciation Schedule is 100% deductible in the year you pay for it. That’s why we get lots of people paying in June. As for whether it’s worthwhile, it depends on the property and your tax situation. We have a guarantee that if we can’t find more deprciation in the first full year of the schedule than our fee, we’ll give you the schedule and refund your money. Having said that, we’ve only given away about 6 schedules in 3 years – my guys are pretty good at working out over the phone whether it’s worthwhile getting a schedule.
Costs will vary depending on where your property is. I’ve got 70 Quantity Surveyors around the country in most places where people are buying properties, so feel free to call – 1300 660033. If it’s Kalgoorlie, Mt Isa or Broken Hill, though, forget it. We can get there, but travel costs are a killer. There often isn’t much depreciation in the properties people are buying in these places, either.
Re: The Reno Kings. I’ve seen their seminar material and it’s pretty good – lots of practical advice. I’ve also met both the guys and they seem decent – they’re not your typical seminar presenters. Of course, to make what they advocate work you do need to be able to acquire property at the right price, and I’d say that’s getting tougher these days.
ScottFlash,
You may not find a list of percentages, but you will find a list of effective lives. The ATO has decreed the effective life of many items (though you can self assess). This life drives the depreciation percentage. Carpet, for example, has an ATO effective life of 10 years. Using the Prime Cost method, it can be depreciated at 10% per year for 10 years. Using the Diminishing Value method, however, it can be depreciated at 15%pa on the diminishing value i.e. more depreciation up front. Then there’s the Low Value Pool. Items worth under $1,000 can be depreciated at 18.75% in the first part year and then 37.5%pa after that. And there’s still the immediate write-off for items costing under $300. It can all be a tad complicated, which is why engaging the services of a Quantity Surveyor and/or a good accountant is pretty wise. The new ATO determined affective lives come into play on July 1. They’d be on the ATO site somewhere. If you can’t find them, send me an e-mail on Monday. I’ll get one of my Quantity Surveyors to dig them out and I’ll send them to you. Happy to send them to anyone else who wants to see them, too – they are only in draft forn at the moment, though.
[email protected]Disreputable providers of Tax Depreciation Schedules may try to tell people that past schedules need to be revised. The ATO has clarified the fact that the new rules will apply to properties purchased after July 1 this year, which should make alot of people breath easier. There will still be some confusion this tax season – I called the ATO on Friday to ask a question about the impending changes and the person I spoke to didn’t know what I was talking about.
Nope, not very disciplined either. But very successful – must be luck.
Like tax agents and accountants, most Quantity Surveyors welcome the clarity of the new gudelines. Whenever the ATO make some grey areas a bit more black and white it makes everybody’s job a bit easier. We’ve done some backtesting on recent schedules and found that many investors who buy houses may be better off. As Julia said, always be very wary of ‘depreciation estimates’ provided ny developers – they have a vested interest in making these estimates look attractive.
ScottJust think of depreciation as an outgoing, like interest, rates, management fees etc. Yes, commercial is pretty similar to residential. When it comes to CGT, only residential benefits from the 50% discount. In regards CGT, when an asset is sold, depreciation claimed on the building only i.e. not the depreciable assets, is subtracted from the cost base. Your accountant may tell you that even if depreciation on the building ISN’T claimed, it still has to subtracted from the cost base. Lots of investors use depreciation for cash flow. Smart investors put the money they claim in depreciation into something like a sinking fund for the upkeep of their property. I don’t do this.
ScottO only ever communicate with my tenants through my property managers. And not every tenant is rewarded. As I said, it’s the ones who go out of their way.
Depreciation benefits on pre 85 built properties are being progressively squeezed. A number of items have been removed from the Depreciable Assets register NB this register is a little bit arbitrary and it’s prudent to monitor Interpretative Decisions and Rulings to determine where the ATO stands at any given time. We no longer include television aerials, switchgear and telephone installations – it’s the ATO’s contention that these are part of the building. When the new changes come into effect, light fittings will be treated similarly. We have a guarantee that ‘if we can’t find you more depreciation than our fee in the first full year, your schedule is free.’ So it’s worth a call to 1300 660033. If my guys don’t think it’s worth doing a schedule, they’ll tell you not to spend the money.
[email protected]It’s never happened to me. Maybe I’ve been lucky. Then again, I’ve done it for a number of years with a fair few tenants. I reward tenants who are prompt with their rent and go out of their way to take care of (and in some cases improve) my properties. So they make the first gesture, and I acknowledge it. My tenant retention rate is excellent.
I think this is a good thread. Once I get a tenant, I do everything I can to keep them. Of course, this probably flies in the face of hard line investor wisdom – see Yack. I have a tenant in a block of flats I own who is a keen gardner. I give the local nursey $40 per month and they keep a tab for her. The gardens look great – lots of flowers (which in turn helps attract other tenants). I’ve got an 18 yr old girl in another property who is doing the HSC. She’s working part time at Coles. I’m giving her a week’s free rent around mid year exams so she can study. I’ve got a single mum in another place. Once a month I pay a local babysitter to go there and give her 4 hours off. I do these sort of things through my property managers. They equate to a rental discount of around $10 below market but I find they engender great tenant loyalty. And yes, when I have a good property manager, I reward them too.
ScottDon’t forget depreciation as an outgoing when you’re doing your calculations, Nathan. I agree also that when you start to get investment properties it’s time to look for an accountant who understands property.
I didn’t say avoid country areas. You put it more succintly than I did, Yacka, when you said investors need to look at an asset’s fundamental value. To take your point Rubbachook, alot of research is done by prudent investors on rental vacancies, town demographics, employment etc. I just think consideration of replacement value of the property + land value should be an essential part of the evaluation process.
Just thought I’d wade into this one. I’ve long been a reader but rarely a participant of this forum. We’re getting an increasing number of calls about Tax Depreciation Schedules from investors buying in small country towns, as well as some larger ones: Kalgoorlie, Broken Hill and Mt Isa to name a few. Cash Flow Positive is a mantra that’s leading people to some pretty remote places. Demand in those places from like-minded disciples is pushing the prices up. I worry occasionally about the type of properties these people are buying. Let’s put aside for a minute how the numbers may stack up i.e. rent vs purchase price. Somebody recently came to us after paying $70K for an IP in Mt Isa. Rent was around $140, so that’s okay. My concern was that the property was built in the 60s, constructed of concrete blocks with a tin roof, and sitting on a pretty cheap block of dirt – and I do mean dirt. The amount she paid was way, way above the replacement cost of the building + land. That sort of thing worries me a tad.
Vendor schedules are generally wrong. Always get them checked out by a depreciation specialist before you use them.
