Depreciation stuff I didn't know about...

A few interesting things the depreciation schedule people told me whilst I was preparing the info for my lastest depreciation schedule:

1) ATO does not recognise rainwater tank pumps as being specific depreciating assets, despite these being mandatory in most new homes for some time. This means that presumably the rainwater tank pump is only considered to be part of the building and depreciated over 40 years, despite them lasting only 5-10 years. I can't think of any other item that plugs into a powerpoint that is not considered a depreciating asset so this seems crazy.

2) When building a brand new property, costs of landscaping such as plants and turf may be considered part of the construction cost (ie you get to include it in your building allowance). Apparently, there have been some private rulings to agree with this in relation to brand new properties only, although I don't know if it is the "official" ATO view yet.

Can't find much info on the above on the ATO web site. BTW since the ATO re-did their web site it is very difficult to find the private rulings search I think... for a while I thought they had got rid of it completely.

Oh and ATO web site and everything related to it is shutting down for all of the christmas break... so if you were thinking of catching up on tax stuff over xmas think again.

Regarding pumps:

I don't have any experience with the ATO on this particular item.

But I do know it is legally questionable, I guess nobody has called his bluff yet.

Also, what about items that are allowed like irrigation pumps, fire pumps and of course septic tank pumps.

I would like to see the Commissioner dispute the last one !!!

Cheers,

Rob

Poppy, I think you should change the title of this thread to 'Depreciation stuff the people who did my Depreciation Schedule didn't know about'.

'Water pumps' are an Asset. As are irrigation pumps, fire pumps etc as Rob said.

The water tank itself is 'building'.

You'd be hard pressed paying more than $1,000 for a water pump in a residential application, so your pump can go into the Low Value Pool if your elect to use the Pool.

Scott

poppy said:

BTW since the ATO re-did their web site it is very difficult to find the private rulings search I think... for a while I thought they had got rid of it completely.

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In my previous life I used to be a usability consultant, designing interfaces to be intuitive and easy-to-use. The ATO's current interface is one of the worst I've seen; it's woeful. I'd love to know whether they had any HCI (human-computer interaction) professionals involved. They should have, but there's no evidence of it.

'Water pumps' are an Asset. As are irrigation pumps, fire pumps etc as Rob said.

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Thanks for your reply Scott. The depreciation schedule guy wasn't saying that THEY didn't think the water pump was a depreciating asset... they stated that they had been asking the ATO for years to clarify their position on rainwater pumps. My impression was that the ATO didn't officially recognise the pumps as being a asset which lasted XX number of years, therefore the tax payer would have to prove their case as to how long the pump would last - with the ATO perhaps assuming that the pump was part of the rainwater tank and should last 40 years.

What do you think about the landscaping? I have a few brand new properties and had thought from reading on the ATO website that claiming plants, mulch etc as part of the construction cost for a new IP was a big no-no.

Hi, can't you claim plants, landscaping etc as part of rental costs? I did but then the amount claimed was very small cos I potted the plants myself & pushed a wheelbarrow as well. I claimed costs of materials under rental expenses because to my way of thinking, no tenants would want to rent if I didn't prepare the garden etc.

KY

can't you claim plants, landscaping etc as part of rental costs

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If you just replace a few plants in an existing garden then you should be able to claim that upfront. However doing an entire backyard no.

If you did it yourself and just spent a few hundred dollars then the ATO is fairly unlikely to question it though.

Thanks for your reply Scott. The depreciation schedule guy wasn't saying that THEY didn't think the water pump was a depreciating asset... they stated that they had been asking the ATO for years to clarify their position on rainwater pumps.

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Poppy, I think they're having you on. The ATO have had an Effective Life for pumps as far back as I can remember. On the ATO website (somewhere) you will find the Tax Ruling that lists Effective Lives. There are thousands and thousands of Assets. Water pumps would be listed in there in the residential section. But this could be too complicated for them. There is an ATO publication called Rental Properties 2008. It's a pdf that you can download. It has lots of great stuff for taxpayers about rental property deductions. At the back of this pdf you will find the Effective Life tables for the most common items in residential properties. There would be less than ten pages of them. In the first section - Assets, General - you will find water pumps. They are the item directly about water tanks. Your depreciation guy might appreciate it if you give him a copy of the pdf - God knows what else he's getting wrong.


Getting a straight answer out of the ATO on landscaping is hard. Whenever the going gets tough for them on the phone, they say: 'You'll have to apply for a Private Ruling.'
Hard landscaping i.e. paths, fences, retaining walls etc isn't a problem. It's structural.
Soft landscaping is trickier. With a new build where you pay a builder, say, $180,000 for a home that includes soft landscaping, you'd probably be okay because that entire $180,000 is the cost of the 'improvements' to the land. That's the line the ATO would probably take on the phone, but the call would have to be escalated to arrive at that.
Adding grass, plants etc to an existing property isn't something you can depreciate. And it's not really a repair. But most accountants I imagine would put the cost down under 'maintenance' and it's only going to be an issue if the ATO query what the maintenance was. If a contrator is doing the work, it might be handy if his invoice just said: Garden Maintenance, rather than listing plants etc. This is accountant territory, so as always check with your accountant.

Scott

Depreciator, thanks for your reply on both issues. I've spent a lot of money on landscaping over several brand new properties so it's worth knowing this info. I also have a number of rainwater pumps!

Yes indeed the ATO rental property booklet has an item listed for "water pumps". According to the ATO booklet they last 20 years - I have been told that rainwater pumps only last 5-10 years so this perhaps is what my depreciation guy was trying to communicate to me (I didn't discuss the finer detail of the tax law with him). After all, the rainwater pump is in constant use to refill the toilet etc so will have a much shorter lifespan than some other types of water pumps.

ozperp said:

In my previous life I used to be a usability consultant, designing interfaces to be intuitive and easy-to-use. The ATO's current interface is one of the worst I've seen; it's woeful. I'd love to know whether they had any HCI (human-computer interaction) professionals involved. They should have, but there's no evidence of it.

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The ATO site is a joy to use ......................compared to the Victorian education web site for online job applications. There is no worst site !

Hi Poppy,
It is quite acceptable to make your own determination of the Effective Life of an Asset if you believe the ATOs one does not suit your situation. For example, it could be argued that carpet in the foyer of a building may wear faster than carpet in the bedroom. Your pumps that are in constant use will wear out quicker than ones that are rarely used.
With your pumps, the Effective Life isn't really relevant if you are using the LVP - and 99.99999% of investors use the Pool. Those pumps would have cost less than $1,000 each. So depreciation in the first part year is 18.75%, and then it's 37.5% per year after that on the diminishing total. You will write-off about 80% of the cost of the pumps in about 5 years.
Scott

Thanks Scott great point. I do use the low value pool but it had never clicked that this was a "way around" worrying about the effective life.

From a newspaper article

Whats the depreciation on the garden gnomes?

redsquash said:

The ATO site is a joy to use ......................compared to the Victorian education web site for online job applications. There is no worst site !

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It must be an Education thing.

I work for the NSW dept of Education and I had to write down how to find my pay/leave info so I can find it next time. It's very confusing (clear as mud).

Garden Gnomes

redwing said:

From a newspaper article

Whats the depreciation on the garden gnomes?

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They paid more than $300 for each garden gnome?