Depreciation on Units

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From: B Ready


Hi All,

Can anyone please advise my on whether depreciation (building), if any, is claimable on units?

If I was to purchase a 20 year old 3 bedroom unit for $130000, how is the value of the unit calculated and would it be the same for a townhouse or villa? I would assume it would depend on the condition.

Thank you all very much in advance.

BR.

 

[WebBoard]

Reply: 1
From: Debra L


Building depreciation is only applicable to properties constructed after July 18th 1985. An allowance of 4% of the cost of construction applies to properties built between July 18th 1985 and September 15th 1987 and 2.5% applies to properties built after September 19th 1987.

If the unit you purchase is 20 years old there would be no "Building" depreciation available, however there may be some available to depreciate on "Fixtures and Fittings" if any of these have been updated in recent years...ie carpets, curtains, hot water service etc. As these items are depreciated over their effective life you will have to estimate the age of the particular item, estimate the original cost and them calculate the written down value. The effective life of certain items is as follows:
Blinds 20yrs @ 7.5%
Carpets 10 15%
Curtains 7 21%
HWS 20 7.5%
Stove 20 7.5%

 

[Rolf Latham]

Reply: 1.1
From: Rolf Latham


Hi Debra

Are we not glad the tax department really did their homework on effective lives of depreciables. 20 years for a HWS - today ? I got 7.5 out of my last one !

Ta

Rolf

 

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Reply: 1.1.1
From: Jeanette .


I printed out the worksheet from the ATO site on how to calculate depreciation and the examples they gave had depreciation rates higher than those given above. Surely they wouldn't be using incorrect rates in their example.

 

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Reply: 1.1.1.1
From: Debra L


Jeanette,

The New tax department rulings now mean that all fixtures and fittings for both the Prime Cost and Diminishing value method for properties purchased after 21st September 1999 are now based solely on the effective life of an item. The calculations are:
Prime Cost Method

Depreciation rate = unclaimed value X (100% / effective life).

Diminishing Value Method
Depreciation rate = unclaimed value X (150% / effective life).

Any properties that were purchased prior to 21st September 1999 can have the fixtures and fittings depreciated at the old accelerated rates such as Curtains 30%, Carpets 20% etc as listed in the Tax Office example.

 

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Reply: 1.1.1.1.1
From: Jeanette .


Hi Debra

I'm addressing this to you because you sound like you understand the topic.

On the ATO website in its article about rental properties it says:

"Changes proposed to operate from 1 July 2000:
- end of immediate deductions for plant and equipment costing less than $300 - except for small business taxpayers;
- introduction of a low-value pool for plant and equipment costing less than $1,000 - except for small business taxpayers.
Changes proposed to operate from 1 July 2001
- a new tax law for all depreciating assets, not just plant and equipment.
(contained in New Business Tax System (Miscellaneous) Bill 1999 subject to further consideration by the Government."

It worries me about the bit from 1 July 2000 - this is rapidly coming upon us. Do you know what the changes are and if indeed, they are coming into effect?
Look forward to any help on this topic.