Depreciation write off

[thetom]

We just had a tenant break lease and now that he has moved out we have realized he has done a small number on the property. Cigarette burns in the carpet in every room along with what i am thinking is dog poo smear throughout.
There is also a tear in the kitchen lino.
The house had been newly renovated when we bought it 9 months ago and we had a depreciation schedule completed.

Since the carpet had only lasted one year of its depreciation life out of ten and it needs to be replaced can the remainder of the nine years depreciation be claimed at the next tax time?

 

[Jaggannath]

Talk to an accountant, but in short I believe yes. Depreciation is just a way of accounting for the capital value of items over the life of them, so that you're compensated for replacing them.

 

[syba]

Depends. Do you have Landlord Protection Insurance and are claiming the damage through that? If so any excess you have to pay on your policy is deductable, but the cost of repair is cancelled out by the payment from the insurer. If you don't have landlord insurance - go get some. Is pretty cheap, tax deductable and well worth it for situations like this.

 

[marg4000]

A good carpet clean should get rid of the "smears".

It is very hard to justify full replacement after one year for some cigarette burns or a single tear in lino.
Marg

 

[thetom]

We have landlord insurance and a bond of $1400 to use up. The smears should clean up. It's mainly the holes in the carpet from the cigarette burns. I knew the excess was claimable. My main query is with the depreciation shedule. Say the previous carpet was $2000 and we have claimed $200 last year does that mean for the next year we can claim $1800 and then start the capret depreciation again with the new carpet cost over 10 years?

 

[Paul@PFI]

The answer is Yes if its disposed of. The new carpet however may have an offsetting assessable effect if the tenant bond is retained or a tenant contribution is made.

If its insured the insurer will pay for the new carpet. The receipt from the claim is assessable income and a new depreciable item exists...Note that this can create a tax period difference... eg Up front assessable v's long term deduction. However the write-off can mean a net effect of zero in some cases. Don't expect a windfall.

Importantly the new carpet isn't a zero cost if the insurer pays the claim. There is an assessable receipt + depreciation issue. Plus a potential write-off...

Important that the QS report is adjusted for this....I know BMT provide a copy of the report in excel to the accountant. Your QS may be able to assist.

 

[Paul@PFI]

A good carpet clean should get rid of the "smears".

It is very hard to justify full replacement after one year for some cigarette burns or a single tear in lino.
Marg

If its tenant damage it is justified. They break it they pay for it. They merely pay for use and reasonable wear and tear. Destruction is never part of rent.