Depreciation on Kitchen

From: John P


I have just bought a unit that is about 20 years old and it has a brand new kitchen in it. My question is, when I get a dep. schedule done, can the cost of this fixture be included??

Thanks


John
 
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Reply: 1.1
From: Geoff Whitfield


Dale,

Are some of the components in the kitchen regarded as capital and not depreciable- so they only count against capital cost when you sell it?
 
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Reply: 1.1.1
From: Dale Gatherum-Goss


Hi Geoff!

The capital items are "depreciated" at 2.5% of their deemed cost by the QS. Take the tax deduction now and yes, when you sell the house, there are CGT implications from doing so.

But, one step at a time.

Dale
 
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Reply: 1.2
From: John P


Cheers Dale I did not know that. Would it be worth my while to see if I can get a photocopy of the receipts from the vendor outlining the cost of the kitchen fitout? Would this in any way assist the QS in reaching their final figures on the sched.? Am I likely to get a higher estimate without the giving the QS any receipts relating to the fitout?

Regards


John_P
 
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Reply: 1.2.1
From: Dale Gatherum-Goss


Hi John

Yes, get the receipts if you can. But, still ask a QS to estimate the cost and then use whichever gives you the best result.

Dale
 
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Reply: 1.1.1.1
From: Geoff Whitfield


Dale,

Are there some items which could be depreciated more quickly?

I seem to remember someone saying that if kitchen cupboards were removable, the were not fixtures, and could be depreciated at a much higher rate. Or is this an urban myth?
 
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Reply: 1.1.1.1.1
From: Dale Gatherum-Goss


Hi Geoff!

Yes, that is possible. I normally allow the QS to do his job and just rely on the information provided to me. That way, the tax office cannot argue with the results.

Dale
 
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Depreciate or Appreciate?

Reply: 1.2.1.1
From: Joe D


I recently had a depreciation schedule done on a 6 year old IP by a QS who itemised all items with a value at time of construction (96) and a value at the time of settlement (Mar 02).

Whilst he was very familiar with construction pricing/costs etc he admitted he was not fully conversant with latest tax rulings, and as such, he would itemise each component and leave it to my tax adviser (accountant) to interpret as to how each item should be depreciated.

He did a great job in itemising a base cost for special building write-off as well as an itemised list for additional "grey" items which could be depreciated separately at higher rates or added into the special building write-off component.

As part of his brief, I provided him with drawings/plans (obtained from council) as well as a few receipts the previous owner had passed onto me.

What I was surprised to discover from my accountant (please confirm Dale) that all the non-receipted items could be depreciated as from the date of settlement (generally at a value the same or slightly higher than their original purchase value even though some were as old as the building itself, whereas, the items for which receipts were produced would need to be depreciated from the receipt date, which in a lot of cases gave them a nil or minimal value at todays date.

In hindsight, I would have been better off "losing" these receipts (or at least not giving them to the QS.)

Funnily enough, I can't understand the logic behind this ......

Joe D

" Juggling is like life...... its fun, but sometimes you drop the ball ! "
 
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Depreciate or Appreciate?

Reply: 1.2.1.1.1
From: Dale Gatherum-Goss


Hi Joe

This is not the first time that I have heard that argument. However, I must confess my ignorance, as I know of no laws that allow such a claim. (Otherwise, your accountant would not have told you what he/she did, would he/she?)

I rely wholly on the QS report to tell me what depreciation claims are available as they are the professionals whom the tax office rely on when it comes to accepting any claims that you make. If the QS suggests that an amount is allowable this year then I will accept that amount for practical purposes.

Just note though, the QS report must satisfy the Tax Office requirements for reasonable values. . . .

And, if your accountant would like to share details of the law that he/she quotes, I'm sure we would all like to know it. Especially me!

Dale
 
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Depreciate or Appreciate?

Reply: 1.2.1.1.1.1
From: Owen .


I have had this scenario happen for me on 2 separate 8 year old apartments. In both cases the depreciation value for items was calculated off the purchase price of the apartment at time of settlement. It gave me huge depreciation way above the actual value of the individual items.

I then renovated. I have scrapped the original schedule and have got a new report produced in the apartments post-renovation condition. As I got some great deals on the new items for the renovations I did not show my receipts to the surveyor and their QS estimate values will still provide nice depreciation for the future. If any of my receipts were greater than their estimates then I would have shown the receipt for that item.

The ATO say that scrapping of reports is allowed under the classification of 'not fit for purpose' rules. These include; obsolescence; functionally inadequate; dated style; original form was inappropriate or does not maximise the form and function of the property; or additional value to the owner is obtained from a renovation.

Sounds like a reason to do a renovation with a before and after QS report to me.

Owen

"Gambling promises the poor what property performs for the rich – something for nothing"
 
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Reply: 1.1.1.1.1.1
From: Geoff Whitfield


Dale,

Granted that the QS will do his job.

But, if I know that a QS will depreciate a removable item differently (perhaps at 25%) from a fixed item (at 2.5%), I might plan my reno differently.

Hey, we've had fantastic advice in this forum from some excellent accountants (well, one at least), mortgage brokers, renovators and the like- it's a pity we don't have quantity surveyors or valuers (to my knowledge) sharing their wealth of experience as well.
 
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Reply: 1.1.1.1.1.1.1
From: Jas


> From: "Geoff Whitfield" <gwhitfield@hotmail.com>

Hey Geoff,

I was talking to a bathroom importer and he mentioned that he has a
special set of units on wheels, so 1) you can change the room around,
and 2) they are deprecated quicker.

My immediate thought was that the tenants would be wheeling them out
just as fast as I could wheel them in... Give me something stuck to the
wall any day!

Jas

To paraphrase Charles Mackay - By the vile arts of stock-jobbers!
 
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Sim

Administrator
Reply: 1.1.1.1.1.1.1.1
From: Sim' Hampel


On 5/8/02 1:51:11 PM, Jacinta Thomler wrote:
>My immediate thought was that
>the tenants would be wheeling
>them out
>just as fast as I could wheel
>them in... Give me something
>stuck to the
>wall any day!

Hey jas, there is such a thing as a tenance agreement and bonds and insurance and such which should cover you for walking fixtures.

Or maybe there's just a lower class of tenant in Canberra ! :p

sim.gif
 
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