Depreciation - How is it calculated?

[neK]

As I understand (and I'm actually hoping I'm wrong), if i buy an existing house, build a granny flat, I can get a depreciation schedule done and its based on the build cost of the granny flat. The value of the land is ignored.

If I buy a brand new off the plan unit for $800k. What is the estimated depreciation on this? Is it based on the purchase price?

Surely this can't be the case because a large portion can be attributed to the land/location ?

 

[Jamie_]

As I understand (and I'm actually hoping I'm wrong), if i buy an existing house, build a granny flat, I can get a depreciation schedule done and its based on the build cost of the granny flat. The value of the land is ignored.

If I buy a brand new off the plan unit for $800k. What is the estimated depreciation on this? Is it based on the purchase price?

Surely this can't be the case because a large portion can be attributed to the land/location ?

Is the land going to depreciate?

 

[neK]

Is the land going to depreciate?

My point exactly.... so how does depreciation work in these situations?

 

[depreciator]

Surely this can't be the case because a large portion can be attributed to the land/location ?

Yep. You are correct. So a starting point for depreciation would be an estimate of the build cost of just your apartment (and associated common areas). That will depend upon the quality of the build, size of the building etc.

 

[Paul@PFI]

As I understand (and I'm actually hoping I'm wrong), if i buy an existing house, build a granny flat, I can get a depreciation schedule done and its based on the build cost of the granny flat. The value of the land is ignored.

If I buy a brand new off the plan unit for $800k. What is the estimated depreciation on this? Is it based on the purchase price? NO

Surely this can't be the case because a large portion can be attributed to the land/location ?

Depreciation and capital allowance deductions are based on actual or estimated cost of construction or specific items of plant and equipment. If you incur the costs then the report will be based on cost. If you don't have the cost information (ie you bought from a vendor) then the QS can use estimates. Land value / cost etc doesn't come into it. There are some rules which can affect this general view.

If you buy strata etc your schedule will also include a share of common areas (that you don't even own).

If you build the GF yourself the cost will be based on the materials etc alone. No allowance for profit, value or labour. If you engage a builder the contract price is your cost and is used.