Building Depreciation Question

W

WebBoard

Guest
From: Glen Taylor


Hi All,

Bought my first IP yesterday and I'm all excited. I frequent this site often and just love it!

And now to my question:

I approached my Accountant and asked him about building depreciation (Capital works deduction - special building write-off provisions) on a residential investment property.

He basically indicated that you could not claim Building depreciation unless you build the property for invest purposes, or you purchased the property from an investor who did, was renting it out and passes on the undepreciated amt to you. Plus of course the ol was constructed after 1985.

I read a document from the ATO regarding Capital works deduction (special building write-off) and it has a section of changes in building ownership and it says "...to be eligble for the deduction, must continue to use the building for income-producing purposes." which sort of supports my accountants view. However, all other examples relating to building depreciation do not specify that the previous owner had the property for investment purposes.

In short:
If I purchase a 4yo house from an Owner Occupier and use it as an investment property, can I claim building depreciation?

Many thanks in advance,

GlenT.
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 1
From: The Wife


Hi Glen,

Thats a question for one of the many good accountants that visit this forum, I'm sure they will give you a good answer.

I just wanted to say "congratulations!" on your 1st IP.

TW
~Life is a daring adventure, or nothing at all~
 
Last edited by a moderator:
Reply: 1.1
From: Les .



G'day Glen,

I, too, would like to pass on my congrats. And (having seen The Wife pass up on a direct answer) I figure I need to consider the saying "Fools rush in where angels fear to tread" before answering. Ummm... Ponder ... Nnnn ... Y... Mmmm

Ah, what the hell, maybe I'll just walk in slowly, (how about "sidle up") and say "I've got $10 that says your accountant owns no rental IP's!"

In other words, in my opinion it would be well worth getting a second opinion ;^) (but he WAS right about the 1985 bit...)

Regards,



Les


- "Eschew Obfuscation" - ;^)
 
Last edited by a moderator:
Reply: 2
From: John P


Ofcourse you can!!!!!!!!!

Your depreciation should start from the point at which you bought it. In other words, imagine that the previous owner HAD used it for IP purposes, and you bought it when it was 6 years old. You simply depreciate it from then on (ie) what the depreciable items are worth now.

If anyone thinks this is wrong, speak now or forever hold your peace!!!!

Johnno
 
Last edited by a moderator:
Reply: 2.1
From: John P


PS A Big Congrats on your first IP.Make sure you take photos of ALL parts of the unit inside and out as your quantity surveyor may need to see them and it also worth having for possible insurance purposes. It wanted to remind you about this BEFORE you put tenants in there.


Johnno
 
Last edited by a moderator:
Reply: 2.1.1
From: Les .



I've got another $10 that says John P knows the facts better than your accountant.

The ATO will need to have you use a QS if you don't have the original depreciation schedules (it sounds like you don't, if the property wasn't built/bought as an IP initially).

G'day Johnno - good to catch up with you on the weekend - I had a great afternoon, how about you?

Regards,

Les


- "Eschew Obfuscation" - ;^)
 
Last edited by a moderator:
Reply: 3
From: Rolf Latham


Hi Glen

Yay :eek:)

I know little about tax law, but I know lots of people that do.

They are telling me you perhaps should get a new accountant.

Ta



Rolf
 
Last edited by a moderator:
Reply: 3.1
From: Dale Gatherum-Goss


Hi

I KNOW that your accountant is wrong. You can claim the costs of construction on any property built after July 1985 (I'm being deliberately simple so please don't try to correct me on this) although, you will need to get a Quantity Surveyors report to substantiate your claims.

I would take my information and find an accountant locally who does know something about IP's. This one is costing you money not saving it or making it for you.

Run. Run fast and run far!!!

Dale
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 3.1.1
From: Glen Taylor


Hi All,

Many thanks for the support. After looking into the market for over 2 months, it feels good to finally get into the game, knowing that I've done my homework.

Les gets the big $10. My (soon to be ex) Accountant is all for shares and managed funds. "Shares have always out performed property in any given time frame" he says. I was all like "Oh god, here we go again". But I felt that having read the books, I am convinced that this is a far better investment option. (Thanks Jan, Dolf and John)

Yes, I'm going to take heaps of Photos for the ol before and after (both our renovations and tenants).

I have a further question for the forum.
I was going to ask the owners (before they disappear) for details as to when and what approx cost of various improvements were made to the house, ie A/C, roller shutters, ceiling fans, security screens and patio. Is this OK, or should I just let the QS estimate the values?

GlenT
 
Last edited by a moderator:
Reply: 3.1.1.1
From: Michael Croft


Assuming you are getting a QS report anyway, get the QS to do it as they generally use full retail prices and the owners may have got a good deal. But just in case get the owners prices and use the greater of the two ;^)
 
Last edited by a moderator:
Reply: 2.1.1.1
From: John P


I had a great time Les. Maybe next time I will have better luck with the dice!!!!!
 
Last edited by a moderator:
Reply: 3.1.1.1.1
From: John P


What Michael just said had never occurred to me but it makes very good sense. You are more likely to get higher amounts on these items from your QS so perhaps in most instances it would NOT be a good idea to ask the vendor.

PS If you're based in Sydney I can highly recommend my guy. Let me know if you need the details.

2nd PS No offence but your existing accountant sounds quite incompetent!!!
I would drop him/her like a bad habit!!
 
Last edited by a moderator:
Reply: 3.1.1.1.1.1
From: Ian Findlay


Based where?

> What Michael just said had never occurred to me but it makes very good
sense. You are more likely to get higher amounts on this items from your QS
so perhaps in most instances it would NOT be a good idea to ask the vendor.
>
> PS If you're based I highly recommend my guy. Let me know if you need the
details.
>
> 2nd PS No offnce but your existing accountant sounds quite incompetent!!!
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 3.1.1.1.1.1.1
From: Glen Taylor


Hi John,

Nah, I'm based in Perth. Can anyone else recommend a good property Acct and/or QS in Perth? (you can email me if you prefer)

Again, Many thanks in advance,

GlenT.
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 3.1.1.1.1.1.1.1
From: Rob Nobel


Hi all!
This forum's such a good read. I'm absolutely new to purchasing IP's and plan to start in the next month or so. Your comments regarding Quantity surveyors is totally foreign to me and I wonder if someone could explain why it is necessary for a QS particularly the legal requirements.
Also, can someone recommend a QS in Adelaide?
Rob
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 3.1.1.1.1.1.1.1.1
From: Glen Taylor


Hi Rob,

Basically a Quantity Surveyor (QS) is used to itemize and value all the depreciable items in your IP. You can then claim the depreciation as an expense. The beauty of these depreciation expenses is that they are unrealized expenses (ie you don't actually have to fork out money). There are some complications in Capital Gains Tax (CGT) if you claim building depreciation and then sell the property. (so don't sell). ie Put simply buy a property for 100k, depreciate building over the years by 20k, then sell for 200k, the capital gains would be calculated on the Selling price less the depreciated value, ie 200k - (100k - 20k) = 120k applicable to CGT

The legality of it all. You can estimate the value of various items in your IP yourself however, you may need to be able to justify your amounts to the ATO. A QS is a qualified independent valuer that Mr Taxman believes.

Hope this helps.

GlenT.
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 3.1.1.1.1.1.1.1.2
From: Dee Mee


QS in adelaide?
try Rider Hunt - in the phone book
I got my full depreciation schedule for 40yrs
for about $325. You may need to negotiate the price though.
dee
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 3.1.1.1.1.1.1.1.2.1
From: Trina Blum


Hi Glen,

I too live in Perth and have found an accountant who seems to know his stuff about IP's (he has a few of his own). His name is Nathan and his company (which is a family business - him and his father) is:

Wealth Creation Accountants
7/4 Bergen Way
MINDARIE
Ph: 9305 1000
email: info@wealthcreation.com.au
website: www. wealthcreation.com.au

I don't know where you live and if Mindarie is too far for you to travel but we live South of the River and thought it was worth the trip to see him (It's the first time we've seen him - he was recommended to me by Francoise at the Perth Cashflow club).

We are looking around for an investment property in Perth so perhaps you can give me the name of the QS you end up with if he/she is any good. Where have you bought your IP? - can you suggest any suburbs I should have a look at?

If you don't wish to tell I understand and if you would rather email me at:
trina_blum@hotmail.com
feel free to do so. Hope the accountant works out for you and is of some help.

Regards

Trina
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 3.1.1.1.1.1.1.1.1.1
From: Rob Nobel


Thanks Glen. Sounds like a QS is a vital part of securing the best IP return.
But.....Who in Adelaide is "The best QS"?
Rob
 
Last edited by a moderator:
Top