Are depreciation schedules worth getting? Depreciation gets added to capital gain..

[nomadic]

I was checking to see which of my places had a schedule in place and emailed my accountant to find out. His reply was there's no free lunch because any deductions you claim now are added back and you pay tax when it's sold.

I guess it's something to consider if you intend to sell the property at a later date. A lot of people intend to do this close to retirement to reduce debt. So greater cashflow now means a higher tax bill when you sell.

Generally speaking it can be worthwhile to have a report prepared but it all comes down to the age of the building and the internal fit out. If they were built before September 1987 then you don?t get any building write off ? you will only be entitled to depreciation on the furniture and fittings such as hot water systems, stoves air conditioners etc.

Bear in mind that any building depreciation that is claimed will then add to you capital gain upon sale as it reduces the costs base of the building ? so essentially any deductions you claim now you pay tax on when it is sold so it?s not a ?free lunch? so to speak..

 

[thatbum]

But its usually a half price lunch where you don't have to pay for it for 5/10/20 years if ever.

 

[Peter_Tersteeg]

Capital Gains Tax generally gets a 50% reduction if you hold the property for more than 12 months.

You're also getting the benefit of the money now, rather than at some arbitrary point in the future. A dollar is usually worth more today than a dollar will be worth at some point in the future.

Also consider what the opportunity cost of the extra cash flow now is. It might mean you can buy more investments, which will grow in value over time, further contributing to your wealth.

 

[redwing]

Non cash deduction (no need to spend money to claim it) that increases your cashflow

 

[Mr. Fabulous]

nomadic, you might want to PM fullylucky and ask him about this subject. He is the Jedi Master of Depreciation Schedules.

 

[danwatto]

Also remember most people who sell a property voluntarily will do it in a year when there is little or no income to minimise CGT. For example once semi retired and income is lower, after retirement, or even during a year when travelling.

Cashflow saved now is worth more than half that deduction off cost base years later.

Then consider the compound effect if you reinvest all those tax deductions between now and the CGT event over 20 or 30 years.

Also - if you want to take this all the way through an argument of logic - why claim the interest now if you're not allowed to add it back to your cost base when you sell because you've already claimed it?

 

[danwatto]

nomadic, you might want to PM fullylucky and ask him about this subject. He is the Jedi Master of Depreciation Schedules.

+1 fullylucky will ensure no money is spent unnecessarily on any advice, maybe even save you money that would have been spent necessarily too!

 

[fullylucky]

Capital Gains Tax generally gets a 50% reduction if you hold the property for more than 12 months.

You're also getting the benefit of the money now, rather than at some arbitrary point in the future. A dollar is usually worth more today than a dollar will be worth at some point in the future.

Also consider what the opportunity cost of the extra cash flow now is. It might mean you can buy more investments, which will grow in value over time, further contributing to your wealth.

+1

I agree with Peter.

 

[Paul@PFI]

And the benefits of scrapping if you later knock down rebuild.

 

[Redom]

But its usually a half price lunch where you don't have to pay for it for 5/10/20 years if ever.

Haha this. Nicely put.

Worth it in most cases, especially if the property is reasonably newish.

Redom