Asset depreciation for older properties

[Mungo]

Last year I purchased an investment property which was constructed in 1971 and I have received conflicting advice as to whether or not I am able to claim depreciation of certain assets within the property (I do understand that I am unable to claim a capital works deduction - ATO information makes that quite clear).

My accountant maintains that I will be able to claim some depreciation on items in the property (floor coverings, hot water system etc) although he admits it will probably not be much. He is encouraging me to put together an inventory. I approached a quantity surveyor who said I was wasting my time yet I have also seen other quantity surveyors advertise that some depreciation is able to be claimed regardless of property age.

At this stage I am planning on undertaking my own inventory using the list of items in the ATO Rental Properties book as a guide, perhaps looking specifically for items which appear to have been replaced at some time in the last 20 years.

Would appreciate any advice from others with older properties.

Mungo.

[DavidMc]

Hi Mungo,

While I cannot answer your question, I do know of Quantity Surveyors that offer guarantees that if you are unable to at deduct the cost of the Depreciation Schedule in your first year, the TDS is free.

Try www.depreciator.com.au.

Their guarantee from the website:
""If we can't get you more depreciation than our fee in the first full year of your schedule ...
You get to keep the schedule FREE and use it in your tax assessment for the FULL 20 years with our compliments"

I used them for my two properties, and while I found them to be slightly more expensive than others I was happy with their service. With a guarantee like this, it is in their best interest for them to give you an honest assesment of your IP.

Mind you, if the fee is $700 and they only manage to get $700 worth of depreciation, then you are still out of pocket ~$350.


Regards,

David.

[depreciator]

Thanks for that endorsement, David. Yes, we are slightly more expensive than some, but cheaper than others. Of course, I've seen some cheaper schedules that I know would not pass ATO scrutiny. I think it's false economy to save a hundred or so tax deductible dollars and end up with a crook schedule, or one that you have to pay your accountant to finish. We often find investors will get a cheap schedule on their first property and then come to us for subsequent schedules.
Mungo, there may indeed be sufficient depreciation in the fixtures and fittings in your property to justify the cost of commissioning a schedule. Although we have that guarantee David mentioned, if we don't think it's worth the exercise, we will advise against getting a schedule done - no point mucking tenants and property managers around.
Send your inventory list to me and I will have a look at it. Or call me. At the very least, I'll explain how you can self-assess the value of the items. This will be worth doing. There is depreciation there to be claimed, so you might as well claim it. In your property, there will be items worth less than $300, so they can be claimed in full and I'd say everything else will likely end up in the Low Value Pool - 18.75% depreciation year 1, and 37.5% for subsequent years.
Regards,
Scott

[DavidMc]

Further to this, I just received a sample from a 'slightly cheaper' place. Let me say my depreciator reports compare extremely well and are worth that little bit extra.