Depreciation on SMSF property
- Thread starter Barney118
- Start date
The SMSF would still have other income, usually (e.g employer payments) and any loss can be used to reduce the rate of tax payable on this income. i.e. the SMSF can negative gear.
If there is still a loss then this could be carried forward to later years and utilised.
ie. still worth getting a depreciation schedule done.
Depn in SMSF
The issue of "if" a SMSF should use a depreciation schedule comes up a bit. My advice is to get a schedule and claim deductions where possible. If the fund is 100% pension then the rental income and deductions will all be exempt so its a "no issue" matter.
Remember that the add-back for cap allowances wont be relevant though if its a 100% pension asset. Since no deduction was claimed. So no add-back. This can max the CGT outome. And at zero rate potentially. That can also translate to a higher tax-free in beneficiary hands in long run....
Claiming depreciation can affect the year-end accounting issue for the fund though... Let say valuation says $800K. That is after depn etc. So the annual value of depreciation equally reverts to a unrealised gain. So its a zero sum game on financials/member reporting. But tax may differ (since unrealised movements arent incl in tax)
Why bother ???
Things change. Tax laws, rules of pensions, etc... Adding new members who make contribution scan open some strategies for others to use those dedcutions as Terry_w has mentioned. 'Never say never' applies to long term SMSF assets and investments. Better to have depn and claim it...Never know.
This and the "should my fund register for GST?" are common...Issue is every SMSF "can" register for GST. Argue its hardly worth efforts and potential costs of trivial GST for most funds...Accounting / Tax Audits costs ??
The issue of "if" a SMSF should use a depreciation schedule comes up a bit. My advice is to get a schedule and claim deductions where possible. If the fund is 100% pension then the rental income and deductions will all be exempt so its a "no issue" matter.
Remember that the add-back for cap allowances wont be relevant though if its a 100% pension asset. Since no deduction was claimed. So no add-back. This can max the CGT outome. And at zero rate potentially. That can also translate to a higher tax-free in beneficiary hands in long run....
Claiming depreciation can affect the year-end accounting issue for the fund though... Let say valuation says $800K. That is after depn etc. So the annual value of depreciation equally reverts to a unrealised gain. So its a zero sum game on financials/member reporting. But tax may differ (since unrealised movements arent incl in tax)
Why bother ???
Things change. Tax laws, rules of pensions, etc... Adding new members who make contribution scan open some strategies for others to use those dedcutions as Terry_w has mentioned. 'Never say never' applies to long term SMSF assets and investments. Better to have depn and claim it...Never know.
This and the "should my fund register for GST?" are common...Issue is every SMSF "can" register for GST. Argue its hardly worth efforts and potential costs of trivial GST for most funds...Accounting / Tax Audits costs ??
