Depreciation applied retrospectively

[Lotana]

From: Lotana Von Amor


Hi, this is my first posting to the forum,

The question I would like to ask involves a confession. I'd like to confess in having 2 IPs without any depreciation schedules at all. One of them was bought in 1994, used as PPOR for 4 years, then rented out until sold in December 2001. The other one was bought in 1997 as an IP, we still have it.

Now I know much more about property investment and want to get it right. Can I order QS reports for the properties (including the one sold, but I may be able to get access through the current owner) and apply depreciation retrospectively? There is no building amount as both buildings are old.

For example, if the DS report values carpet at say $850 now and depreciation rate using diminishing value method is 15%, may I assume that the value 1 year ago was $1000 etc for a number of prior years and claim the deduction in my next tax return?

If this does not work for the ATO - can anybody suggest another approach?

Thanks,

 

[DaleGG]

Reply: 1
From: Dale Gatherum-Goss


Hi

Yes, you can arrange a QS report from the date that you acquired the property, even now.

Having done so, your accountant should easily be able to lodge an amended income tax return for the previous years.

Go for it! You will be pleasantly surprised by the results.

Dale

 

[Lotana]

Reply: 1.1
From: Lotana Von Amor


Thank you Dale, you are healing my wounds...

Would you know by chance is there a limit on the number of years in the past that one can lodge an amendment for? At the back of my mind I have a figure of 4 years, but not sure.

Regards,

Lotana

 

[DaleGG]

Reply: 1.1.1
From: Dale Gatherum-Goss


Hi Lotana!

Yes, four is the most that you can amend at this stage.

Good luck!

Dale

 

[Owen]

Reply: 1.1.1.1
From: Owen .


Dale,

I bought an apartment 3 years ago that was built in 1934 (no building depreciation here) but had been renovated a few years before purchase and was in good condition. I was like Lotana and didn't know about QS reports and never got one.

I have got reports on all my subsequent purchases and asked the surveyors if I could get one on the first place. I was told by them that there would be nothing left to depreciate and it wouldn't be worth it. I have since found that they will create a depreciation schedule for second hand properties based on the purchase price.

This has all been through the same company and I am about to approach them again about a new property and also ask again about the first one.

Why would I get different results from the same company given your reply to Lotana? Is this rule not well known? Can you depreciate things you have just purchased even though they may be 10 years old?

Owen

"Gambling promises the poor what property performs for the rich – something for nothing"

 

[DaleGG]

Reply: 1.1.1.1.1
From: Dale Gatherum-Goss


Hi Owen!

I'm not sure why you got your answer and without knowing the full facts and details, I cannot rightly say.

However, if the renovations were done within the last 16 years, there WILL be some tax depreciation (special building write off)available for you to claim. How much is the difficult part and will determine whether or not it is worthwhile:

1. paying for a new QS report
2. amending your previous tax returns

Good luck and I hope that it works for you.

Dale

 

[Owen]

Reply: 1.1.1.1.1.1
From: Owen .


The thing that is confusing me is the fact that with a recent purchase, the depreciation schedule values were determined by the purchase price. The property was 8 years old when bought. The values of the individual items in this report are much greater than their true worth because of this (i.e. $4000 for carpet) and are in fact much greater than the cost of the new items I added as part of a renovation of this property (i.e. $2200 for new carpet). This will give me a great tax rebate when I scrap the original report and continue depreciating the new items used in the renovation.

With this knowledge, I can't see why I can't get a schedule for the property I bought 3 years ago (retrospectively now) as the same rules should apply. Although the building was built in 1934, the apartment was recently renovated when I bought it and a schedule should be worked out for the fittings from the purchase price at that time.

I'll have to talk to the QS company again I guess.

Owen

"Gambling promises the poor what property performs for the rich – something for nothing"