Depreciation on a garden shed?

[The Chaser]

Hi all. We are currently building a new IP in Qld and will be adding separately a new 3m x 3m colorbond garden shed on a slab in the backyard (cost ~$2.7K). I assume that none of this cost can be claimed upfront as it is a capital item. However, how is this item treated in regards to depreciation? What sort of deduction will be applicable in the first few years? Any help greatly appreciated. Thanks.

Angela

 

[marg4000]

I would expect this to attract the standard building depreciation of 2 1/2 % each year.
Marg

 

[depreciator]

Marg is probably right.

And you won't get a better answer if you call the ATO, but here's a thought you might run past your accountant:

When something is big enough to drive a car into, you're stuck with 2.5% because it's a garage.

And when something has a slab laid, you're getting into 'building' territory. Especially if the shed is anchored to the slab.

But a 'freestanding garden shed' has an Effective Life of 15 years, from memory. So consider NOT anchoring the shed to the slab. Then you claim the slab at 2.5%, and the shed as an Asset.

It's worth a quick chat with your accountant to see what he/she reckons.

 

[csc2]

Hi all. We are currently building a new IP in Qld and will be adding separately a new 3m x 3m colorbond garden shed on a slab in the backyard (cost ~$2.7K).

Angela

My God, who is robbing you at that price...that is absurd paying $2700 bucks.....

No matter its an IP, id never part with that sort of money fora damm garden shed...you are being robbed blind...

Do the maths on it: Concrete slab, bit of reo and the shed, fitting............gees!!

Thats as bad as a quote I received for an IP regarding a 5000 ltr water tank, quoted $8540.00 installed...

Shop around, your mad if you dont..

 

[marg4000]

But a 'freestanding garden shed' has an Effective Life of 15 years, from memory. So consider NOT anchoring the shed to the slab. Then you claim the slab at 2.5%, and the shed as an Asset.

It's worth a quick chat with your accountant to see what he/she reckons.

Not a good idea if the area is subject to wind or storms of any severity. A steel shed flying around would do untold damage, possibly injure or kill someone.
Marg
PS: Our steel shed is 30 years old and still going strong.....

 

[The Chaser]

Hi all. Thanks for the replies marg and depreciator. Marg is right, we will need the shed to be anchored to the slab. Bummer that it makes such a difference to the way it is treated for depreciation purposes though! I'll double check our options with the accountant as well. Thanks.

Angela

 

[The Chaser]

My God, who is robbing you at that price...that is absurd paying $2700 bucks.....

No matter its an IP, id never part with that sort of money fora damm garden shed...you are being robbed blind...

Do the maths on it: Concrete slab, bit of reo and the shed, fitting............gees!!

Thats as bad as a quote I received for an IP regarding a 5000 ltr water tank, quoted $8540.00 installed...

Shop around, your mad if you dont..

Hi csc. My first reaction to the quote was the same. However, I did put the question out there re: this quote - see http://www.somersoft.com/forums/showthread.php?t=64711. I also got another quote and it was heaps dearer at $3938!! Short of doing the work ourselves (not an option as we are in WA), the $2.7K quote seemed the most reasonable.

 

[syba]

When something is big enough to drive a car into, you're stuck with 2.5% because it's a garage.

And when something has a slab laid, you're getting into 'building' territory. Especially if the shed is anchored to the slab.

But a 'freestanding garden shed' has an Effective Life of 15 years, from memory. So consider NOT anchoring the shed to the slab. Then you claim the slab at 2.5%, and the shed as an Asset.

I agree that if the shed is big enough to drive a car into and has a driveway leading to it (or what could be used as a driveway), then it could be classed as a garage or 'other building' and written off at 2.5%. But good luck getting a car into a 3x3m shed!

Assuming it is being used as a garden shed of soughts, then I see no reason why it can't be depreciated as a garden shed (a life of 15yrs). As long as it can be classed as 'freestanding'. A freestanding shed can be fixed to the concrete slab, but fixed in a way that it can easily be removed. Eg if the shed is bolted to the slab, you can just unscrew the nuts and relocate the shed elsewhere if you wanted. The defining rule here is: if it permanently fixed it is a building; if it can be relatively relocated to another position by a relative 'layperson' without causing excessive damage to anything then it is 'freestanding'.

But as other people have said - check with your reputable accountant.

 

[csc2]

Hi csc. My first reaction to the quote was the same. However, I did put the question out there re: this quote - see http://www.somersoft.com/forums/showthread.php?t=64711. I also got another quote and it was heaps dearer at $3938!! Short of doing the work ourselves (not an option as we are in WA), the $2.7K quote seemed the most reasonable.

Thanks for the info.

I'm going to look into a sideline business if that's the going rate these days.

I can buy a 3 x 3 shed wholesale, Aust made for well under $300 bucks, concrete $200 bucks, few hours labour.....

I'm in the wrong game, seriously...

Tidy sideline job marketed right and in the right city...

Hope your deal works well for you.

 

[Ace in the Hole]

Thanks for the info.

I'm going to look into a sideline business if that's the going rate these days.

I can buy a 3 x 3 shed wholesale, Aust made for well under $300 bucks, concrete $200 bucks, few hours labour.....

I'm in the wrong game, seriously...

Tidy sideline job marketed right and in the right city...

Hope your deal works well for you.

That's looking at it very optimistically.
Sure you can get cost price of items right down, but it's the labour and organising which takes time.

If you are doing it yourself, you need to prepare for slab.
Prepare formwork (need materials and tools for this).
Pour slab, need tools for this, and you need let it cure, so can't do the shed yet.
Assemble shed.
Dispose of all rubbish and clean site.

I think it would be more than a "few hours" of labour all up.
If buying from a business, they have to cover overheads, marketing, warranty issues, etc, which all adds to the costs.

I think $2000 would be a reasonable price (Sydney), WA is probably more expensive.

 

[The Chaser]

The verdict is in...

Assuming it is being used as a garden shed of soughts, then I see no reason why it can't be depreciated as a garden shed (a life of 15yrs).

I ended up having an online chat with someone from BMT. Basically they said the same as syba. The concrete slab is dealt with as a structural item and depreciates at 2.5% each year. The actual garden shed itself is classified as a depreciating asset and thus depreciates at the faster rate of 15 years, being the effective life of a garden shed.

If I don't end up having a breakdown between the cost of the slab and the shed this will be done by the QS. For those who are interested, I was told the way to work out the depreciation on the shed cost will be 200 divided by 15 years to work out the % rate of 13.33% per year. The first year will need to be pro rata from the date of installation.

Thanks for all the replies.

Angela

 

[syba]

For those who are interested, I was told the way to work out the depreciation on the shed cost will be 200 divided by 15 years to work out the % rate of 13.33% per year. The first year will need to be pro rata from the date of installation.

Angela. That's right if your using the Diminishing Value method of depreciation. The Prime Cost method (straight line) is 100/15 = 6.67% p/a. The Diminishing Value method is double the Prime Cost so it is 13.33% p/a.

Good luck and try and get the person who is doing the work for you to itemise the invoice between slab and shed which would make things easier for you come tax time!

 

[depreciator]

Don't forget also that if the shed itself comes in under $1,000 (or when it falls below $1,000 in written-down value) there is the option of the Low Value Pool to speed up the depreciation.

The shed installer will break the cost down for you.

I would also try and get someone on the ground to check the slab before they pour it. If they take a shortcut and make it too thin with no reinforcement (like my brother's shed) there will be tears down the track.

 

[syba]

And if you want a REALLY good job (which I would if I was paying that much for a garden shed), get them to put a rebate around the edge to put the shed into (assuming the slab is the same size as the shed). That way the walls actually finish below the main level of the slab which stops any water getting in. If it's just bolted to the top of the slab, water can seep underneath the shed walls and flood it in a downpour.

 

[depreciator]

I watched a garage get built near me over a few months earlier this year. It was in a lane I walk down to get to the station. I saw the owner of the property one morning when the formwork and steel was in place and said, 'I reckon the top of your slab will be a bit low.'
He assured me the blokes doing it knew what they were doing.
So now, some months down the track, there is an ugly looking hump outside the door to stop water that runs down the lane going into the garage and I know there would be water coming through one side, but it's too close to the neighbour's garage to do anything about it.
If I had one of those new fangled phones I would take a photo of it.

 

[csc2]

That's looking at it very optimistically.
Sure you can get cost price of items right down, but it's the labour and organising which takes time.

If you are doing it yourself, you need to prepare for slab.
Prepare formwork (need materials and tools for this).
Pour slab, need tools for this, and you need let it cure, so can't do the shed yet.
Assemble shed.
Dispose of all rubbish and clean site.

I think it would be more than a "few hours" of labour all up.
If buying from a business, they have to cover overheads, marketing, warranty issues, etc, which all adds to the costs.

I think $2000 would be a reasonable price (Sydney), WA is probably more expensive.

Bugger all rubbish to take away....most can be reused again regarding any form work timber or steel...

So whats needed: Edger, trowel, screed, level....most blokes who are handy would already have those...plus a hammer, few dyna bolts and a rivet gun....oh! and a lunch box with sangas and drinks!!

This is allowing for a two day job, waiting for concrete to cure...but you would have several jobs going at once so wouldnt be an issue really...

shed say $200 which the cheapies are wholesale

mesch: $25

Concrete: $200 (generous)

Extras: Dyna bolts, rivets, fuel etc $20

Max all up well under $500 smackers....

Lay concrete max two hours tops if you use hurry up in the concrete mix

Whats a bit of time cost?

2700.00 minus say 500 leaves $2200...so a third for you, a third for me and a third for the business.

Say 7 sheds a week which could be done very easily thats $15400 gross a week...

Damm nice easy earner if you can get it...

Couldn't do that where I live i dont think but a capital city with good marketing that is easily achieved I feel...

 

[depreciator]

shed say $200 which the cheapies are wholesale

Ah yes, but this was not what the contractor was quoting on. Chaser (who would have thought he was asking such a simple question) specifically wanted a 3x3 Colorbond shed. They're not $200.

Unless the slab is going to sit on top of the grass, there will be a bit of digging. Let's say half a cubic metre of turf and soil to take out and dispose of (and spreading it around the lawn might not be appropriate).

And we don't know the site. Maybe it's a long barrow run from a mini mix truck parked in the street - 9 square metres x 80mm is a few barrow loads.

I'm not sure anybody would get rich going into the garden shed installation business.

Anyway, I'm sure if Chaser wasn't on the other side of the country he'd be doing it himself.