Hi all
In a nutshell is there any reason WHY you would never require a depreciation schedule what so ever with regards to IP?
Is depreciator around….[exhappy]I guess you could always do your own but it’s often best to get a professional one.
If you are going to claim depreciation you need to have a basis for your calculation. The schedule is normally a good basis.
So in short the one time you don’t need one is when you’re not going to claim depreciation.
Cheers
Stu
Accountants used to do depreciation for you as part of your tax return in regards to IP’s, most will not now, ‘some’ still do…
I believe you’d find there’s always ‘something’ to depreciate…IP’s always need upkeep..
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorHi 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
Thanks everyone for help.
Scott,
This property I am referring to is pre-85, I do not have a schedule and am slowly renovating.I will now be looking at modifications/upgrading kitchen shortly. So want to clarify – you are recommending I keep receipts and that my accountant processes.
The big plan is to eventually have the home totally revamped almost like new if that is possible.
Cheers.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.
Depreciator..
would it be beneficial or not to get schedule done before renovations.. then ‘write off’ replaced items..[biggrin]
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow Calculatorthanks guys, I just paid $800 for roof repairs (cash). Shame, cant claim.
But the quotes I was getting was around $1,500 – $1,600. I am still in front anyway. Cheers.
Good, question Redwing, be interesting to find out the answer.[exhappy]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.
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