Depreciation on Townhouses

I suggest you refer to a quantity surveyor/property valuer for depreciation staff of a townhouse. 3 years ago, my valuer told me when I purchased a house or when a house changed hand, it bring a new ” LIFE” to depreciation schedule. That means I got a new depreciation schedule after settlement , no matter how old is the house. You have to check with your valuer how true this is. It is worth to spend that money to engage a valuer who may be able to give more depreciation value than you expect.

Just try to help,
Nichelben

I’d say my guys get one or two calls per day from people asking what depreciation they may be able to get on a ‘typical’ unit/townhouse/bungalow etc.
It’s a tough question, because what is ‘typical’?
If people send us some internal and external photos we can sometimes give an estimate.
There is a QS industry publication called Rawlinsons that gives square metre rates for various construction types all over Australia. It’s not sufficient for tax purposes, but a useful guide. Rawlinsons costs a few hundred dollars, so I’d try a library.
As Les and Rixter have said, once you’ve arrived at a construction cost, depreciation on the building isn’t too hard to work out. If it cost $80K to build in 1995, depreciation will be $2,000 per year. (Incidently, it’s surprising how little things cost to build, say, 15 years ago. In some places, $50K would have built a reasonable free standing house back then.)
Depreciation on the fixtures and fittings can vary wildly. There is no real ‘typical’. If a 1990 townhouse has carpet, air con, stainless steel appliances etc it’s going to yield more depreciation than a 1990 townhouse with polished floorboards, a ceiling fan and a dodgy upright stove.
Roughly speaking, using the Diminishing Value method (which 99% of investors use), around 80% of the available depreciation on fixtures and fittings is claimed in the the first 5 years (weighted toward the first couple of years). So if you’re looking for decent depreciation, you want decent fixtures and fittings.
On a brand new project home, the total value of fixtures and fittings can range from $12K to $20K.
Take a brand new project home with a contract cost of $170K. Deduct from that $20K in fixtures and fittings so you’re left with $150K in construction ie. $3,730pa.
Of that $20K in fixtures and fittings, $6-7K may be able to be claimed in the first year. So the total depreciation claim may be around $10K for the first year.
Now let’s say it’s a lower quality project home. Remember, there is no ‘typical’. The contract price is $120K and the fixtures and fittings pretty basic – $12K worth.
So the construction cost of $108K depreciates at $2,700 per year.
Of that $12K in fixtures and fittings, there may be $4K claimable in year one.
That’s going to give a depreciation total of $6-7K in year 1.
Anyway, that’s just a really rough way of having a stab at possible depreciation. The age of the of the building, the construction type/quality and the nature of the fixtures and fittings all need to be taken into account.
Scott

Tax Depreciation Schedules
Australia wide service
1300 660033
[email protected]
http://www.depreciator.com.au

There is an online service which allows you to estimate your depreciation allowance at

http://www.taxestimate.com.au/

I have no idea how accurate this is (I guess that’s why its an estimate.)

When you eventually buy your property you will need it to be done properly and that’s where Scott (DEPRECIATOR) will be able to help.

Michael Yardney
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