Depreciation Schedule (reno work without tax invoices?)

[TEG]

Hi,

I am in the process of getting a depreciation schedule done on my investment property. I did renovation work on the property when I bought it (2 years ago). The work included electrical work, gyprocking, installed new Air con, installed built-in wardrobes. I engaged tradesmen for this renovation work and I paid them cash and received no tax invoice.

As part of the dep. schedule, can I include the renovation work that was performed even though I don't have any tax invoices for this work?

If the ATO audits me, will they pursue me for this matter (for not having tax invoices for reno work), or is this something I shouldn't be worried about?

Thanks.

 

[Propertunity]

As part of the dep. schedule, can I include the renovation work that was performed even though I don't have any tax invoices for this work?

The QS will include the value of the reno work done on the Depn Schedule - yes.

If the ATO audits me, will they pursue me for this matter (for not having tax invoices for reno work), or is this something I shouldn't be worried about?

Did you claim any of the works as repairs with an immediate write-off or was all the work done on a capital improvement basis (which it sounds like) - for depn. purposes?

 

[TEG]

Did you claim any of the works as repairs with an immediate write-off or was all the work done on a capital improvement basis (which it sounds like) - for depn. purposes?

Thanks for your reply

I bought the property 2 years ago an have been living there as my PPOR since I bought it. The renovation was done within the first 6 months of purchase of the property. I am now going to use the property as an IP and rent it out. I am getting a depreciation schedule done because I did a lot of reno work and I think i could depreciate a lot of it.. my concern is i paid cash and don't have the tax invoices for the reno work.. i am new to property investing and I want to maximise my returns, but also want to make sure everything is legal.

 

[buzzlightyear]

The QS after inspecting the property will evaluate the effective life of all depreciable items based on the year you did your reno and provide you with your report.

If you had receipts, the differece would be that they could simply provide you the report on actuals and the decsription of the works undertaken. What they (ie QS) then charge you might be less given they don't need to do the inspection. Either way, you still get your DS.

Doing this right now as we speak for a reno completed last year. Actually speaking to depreciator from this forum on this. If you haven't organised anything on the QS front, might be worth contacting.

 

[depreciator]

As part of the dep. schedule, can I include the renovation work that was performed even though I don't have any tax invoices for this work?

If the ATO audits me, will they pursue me for this matter (for not having tax invoices for reno work), or is this something I shouldn't be worried about?

If this had been a rental property from settlement onwards and you had done the work while it was a rental property, you would be in strife in the event of an audit if you were claiming for work and you did not have receipts. The ATO expect, not unreasonably, that investors keep receipts for work done to a rental property. Even if you get a discount for cash, still press for a receipt.

I would say there is a reduced expectation that people keep receipts for work done to their PPOR that down the track becomes an IP.

Scott

 

[TEG]

Thanks Scott.

I will definitely insist on a tax invoice from all tradesmen for my future IP's.

 

[pulse]

Imagine a DIY renovator installs a A/C for $1000 themselves. The QS values it at $2000, (what a tradie would cost to supply and install) and then you claim a deduction (depreciation) based on incurring a $2000 expense.

The problem lies in proving that you incurred the expenses. If you have electronic transfer records and a diary it might help. A QS report is not a substitute for shady cash deals. Even if you purchase a recently renovated property the onus is on you to determine the reno value from the vendor rather than rely on a QS. If you did the reno then you would need a good reason not to be able to substantiate with receipts.

Cheers
Pulse