Hi again. As part of my learning curve I would like to learn a little more about depreciation schedules and also scrappage schedules.
Do you all use them? I expect I will buying a property when I take the plunge, of pre 1985 era so I know form the internet that I cant claim depreciation on the building itself at that age but I can claim on the goods inside. What is the process and generally how much do you have a s a deduction. Is it something that is common place on your tax return. What evidence would I have to provide and can I calculate any of this myself.
I know that there are a lot of companies out there which advertise themselves as allowing you to claim back at least twice the value of their service.
So what about the scrappage scheduling. I can research it and learn from Uncle Google but it would be nice to hear some real stories from real people too. I also just noticed that this forum has a search facility. I'll be utilizing that in the future too.
You can calculate it yourself but it is going to be a PAIN IN THE ASS if you don't know what you are doing.
This is because a lot of things are depreciated at different rates.
For example, floorboards are going to depreciate slower than a whitegood like a dishwasher or a fabric like curtains (they get dirty quickly!).
Depcreciation is generally based on how long the item is likely to last for and there are tax laws around how quickly you can depreciate items.
There are also two types of depreciation. The is a fixed depreciation (not the real name sorry) where you can claim the same % of the purchase price each year (eg. 5% on $5,000 in year 1, 5% of $5,000 in year 2 etc) and then there is accumulative depreciation (again the wrong name sorry).
So year 1 might be 20% of $5,000, but then in year 2 the item is now only worth $4,000…so you would claim 20% of $4,000.
A scrapping schedule is a one off event that is recorded when you destroy something to replace it with something new. If there is remaining value greater than that you have already depreciated then you can most often claim it as a loss.
Hope this helps. For further clarification I have created some articles on these topics
Depreciation – http://positivecashflowaustralia.com.au/claim-depreciation-investment-property/
Scrapping Schedule – http://cashflowinvestor.com.au/blog/what-is-a-scrapping-schedule-and-why-should-i-get-one-done/
You can get a "quantity surveyor" to create both a depreciation schedule and scrapping schedule for you. Some even give you a guarantee that you will save more in tax than you pay them in fees. It isn't super expensive to get done.
Ryan McLean | On Property
http://onproperty.com.au
Email MeBrilliant and thanks for the advice.
I would like to know how much I can expect to get back. I think I'm right in saying that if the building is post 1985 I would be able to claim section 43 ( the building itself) so the value of schedule would be higher. I have used a calculator from BMT and they said that if the property was around 2007 and valued at $300,000 I would expect to get about $6000-$7000 in the first year, but to clarify something else, that's not what I actually get in my pocket is it. What I get in my pocket is a value of tax at my marginal rate based on that figure. I am in the high tax bracket so the $7000 would come off my earning as a loss and as I will have already paid tax on that I would see the value of the tax I will have paid of $7000 as a rebate. So if I am at 40% I would receive 40% of the $7000 as a rebate, so a rebate of $2800?
How do I fid out the age of a property being sold online? I have emailed a few of the agents selling the properties to ask for this information and I get little response. Is there a better way?
Thanks again
Paul
Hi Patterson,
Quote:I think I'm right in saying that if the building is post 1985 I would be able to claim section 43 ( the building itself) so the value of schedule would be higher. /That is one to think about a bit. As I recall, lots of books mentioned the properties between 85 and 86 were able to be depreciated over 25 years (at 4%) and the rest over 40 years (2.5%). The latter is the more usual depreciation amount for Capital Works. Now, keep in mind any house built between 85 and 86 has already "run out"….. (25 years from 1986 is 2011). Check this with your favourite accountant though….
Of course any extra Capital Works are still claimable – new garage, new deck, etc. depending on when built.
Benny
I found this guys video and his three part seminar video to explain it very well.
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