Depreciation Schedule Question - for Unit

Hi All,

I have just purchased a unit/flat and have just received the depreciation schedule.

It seems to be a mix of items that are.......
a) in the unit
b) in common areas, with a value based on total value divided by the number of units.

I only expected to see items IN the unit.

So, can I claim depreciation for items in common areas, such as gym equipment and pool equipment. Seems odd to me.

Thx.
 
Who did you use? As long a professional has completed it for you, nothing to worry about. From what I've seen with mine, the quality of Depreciation Schedules seems to vary a lot.
 
Who did you use? As long a professional has completed it for you, nothing to worry about.

Yes, I'm using a professional service.

But they only do the first year.

Still unsure about subsequent additions to common areas, and also disposals from common areas.

Must be a potential nightmare ?
Best to ignore ???
 
A one year Depreciation Schedule?

Still unsure about subsequent additions to common areas, and also disposals from common areas.

Generally speaking, most bits and pieces done to common areas are funded by money contributed to the admin and sinking funds.
Most people claim as deductions their body corp contributions, so they won't then be depreciating anything - that would be claiming something twice.
A diligent accountant would possibly take a different approach to the above.
Lots of landlords - especially those in other states - don't even know what works are done on common areas because so few people read the strata minutes.
When major works are done and a Special Levy is required, the nature of the work in part dictates the tax treatment.
Scott
 
A one year Depreciation Schedule?

Well, they did go out to the year 2023, but that assumes nothing changes.
But I do have a spreadsheet that does depreciation, which I prefer.


Back to the main question.

Yes, I will be claiming Body Corporate fees as deductions, so I see what you say about "double counting".
 
Yes, I'm using a professional service.

But they only do the first year.

Still unsure about subsequent additions to common areas, and also disposals from common areas.

Must be a potential nightmare ?
Best to ignore ???

My last one completed for a unit was practically magazine size (about 100 pgs). Maybe some of the accountants can reply - Shouldn't the D-Schedule be set out over several years?
 
There is not set length or recommended length for a Dep Schedule.
Many accountants have their own software and they just need a starting point and they then enter the figures into their software. So they extract the cost of construction from the supplied Schedule and the WDV of Assets and then toss out the Schedule. Others keep the Schedule on file and pull it up every year.
Establishing the costs is the hardest part. After that, it's just applying the rules and rates to the figures.
 
I agree, once you have a starting point (ie a value that will be recognised as being true and fair), and an estimate of economic life (ie over how many years to depreciate), then it is a case of just applying the rules.
 
Common Area

No matter how clear I am with clients and no matter how many times I tell them its really only when they see it for themselves that they can feel the value of a good depreciation schedule.

Yes ..Common areas are shared. So yes you do get a % of the depn on common areas especially car parking, pool services, lifts etc. These can really add up. Even a small duplex style developmnet can benefit from fencing, landscaped gardens, paths and common driveways + letterbox , signage etc. On a bigger scale a 20 floor apartment building will have very significant common areas. JUst watching "The Block"...Whole bottom floor, pool, BBQ, 80 inch LCD TV, paving, fire services, alarms, lighting, window covering,m signs, glass walls, foyer, water feat etc....Plus top garden deck area. All shared 4 ways.

This leads me to a comment I have heard many repeat over the years....Beware of buildings with significant capital works deductions. They comprise depreciable assets rather than appreciable assets. A house on land sits on a 100% appreciable asset. Dont buy a property for its tax write-offs. Buy it for its potential future improved value. Be your own judge - I'm on the fence.

Yes ...If there are improvements to a property it may be viable to update the schedule if major works are completed by the strata. Does that mean its a double dip ie deductible levies AND improvements ?? Sadly no. Special levies / sinking funds for cap works are NOT tax deuctible to strata owners as these will be utilised for major works incl capital works such as concrete cancer etc. So there is no double dip. Only ordinary levies are deductible.

One thing to watch when buying into a Strata. Check that levies will cover the expected works. A colleague recently didnt buy when he discovered major structural issues in Strata mins. Apparently likely to cost $50K per strata. Levies held were nowhere near sufficent. ..Explained the cheap price. People were bailing out to avoid the cost.

What about when you sell....A CGT adjustment is required for capital allowances claimed. Yep. That reduces the cost base so that lets assume cap allowance sof $10K have been [reviously claimed the capital gain will be $10K higher. BUt remember most taxpayers get a 50% CGT discount so its still good value.
 
My last one completed for a unit was practically magazine size (about 100 pgs). Maybe some of the accountants can reply - Shouldn't the D-Schedule be set out over several years?

Most have a summary page. Often two (two different mtds). Usually at least up to the end of depreciable plant... Most also show the two methods. Pick ONE and dont change ! More paper isnt desirable. 30-50 pages is typical however. These days I check on the report for qualifications under Tax Practitioners Board... Thats important now. Its a tax agent service.

The two methods:
Diminishing Value : Starts high then falls off.
Prime Cost : Tends to be more consistent over time gradually falling.
Personally I prefer Dim Value Mtd as most clients seek to sell sooner rather than later. Its an accelerated method. But each to their own.

Have seen some dodgy looking reports that summarise maybe 2-5 years then they leave a lot to be desired. Thats not acceptable in my books. I have used deppro, BMT and others and they are all fine. Many QS will give a cost guarantee. That can be good for reports when uncertainty exists.
I have also seen "builders" reports. Worthless. Advice = Buy a real schedule.
 
Thanks for the detail Paul. :)

My accountant despised the first report I used and had to call them to ask for additional information. I now use one of the companies you mentioned.
 
Most also show the two methods. Pick ONE and dont change

Once you choose one method, you can't change part way through. You can depreciate each item under different methods (if you really wanted to be difficult), but once you start depreciating it under that method you can't change - can't have the best of both worlds!

These days I check on the report for qualifications under Tax Practitioners Board... Thats important now. Its a tax agent service.
It has been illegal for some time now to provide a depreciation schedule (ie tax advice) without being a registered tax agent. Many reports don't state the Tax Agent's number (not a requirement), but it's easy to search for it on the TPB website. If in doubt, just ask for their number.

In relation to common property - whilst it is great that you can get big deductions for having a lift, pool, etc when you buy in a big unit block, keep in mind that generally the extra cost in maintaining and repairing them often exceeds any depreciation. Often the strata rates for a big development are as much (or more) per quarter than a walk-up unit would pay in a whole year! All types of property has pros and cons - you just have to work out what best suits you.
 
Special levies / sinking funds for cap works are NOT tax deuctible to strata owners as these will be utilised for major works incl capital works such as concrete cancer etc. ............... Only ordinary levies are deductible.


Something I was not aware of, so thanks for the heads up on that.
 
I beg to differ about the sinking fund (not the special levy). Direct copy from the ATO website:

"Payments you make to body corporate administration funds and general purpose sinking funds are considered to be payments for the provision of services by the body corporate and you can claim a deduction for these levies at the time you incur them. However, if the body corporate requires you to make payments to a special purpose fund to pay for particular capital expenditure, these levies are not deductible. Similarly, if the body corporate levies a special contribution for major capital expenses to be paid out of the general purpose sinking fund, you will not be entitled to a deduction for this special contribution amount."

Their definitions of both:

A general purpose sinking fund is one established to cover a variety of unspecified expenses (some of which may be capital expenses) that are likely to be incurred by the body corporate in maintaining the common property (for example, painting of the common property, repairing or replacing fixtures and fittings of the common property).

A special purpose fund is one that is established to cover a specified, generally significant, expense which is not covered by ongoing contributions to a general purpose sinking fund. Most special purpose funds are established to cover costs of capital improvement to the common property.
 
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