Depreciation

[smator]

Hi guys

I bought a one bedroom apartment which settled in January this year. I'm currently renovating the kitchen and doing minor touch ups here and there. It will eventually become a rental unit.

Just wondering with depreciation, is it worth getting a report completed when I'm about to rent it out? Will the depreciation claimable outweigh the cost of the report? Apartment was built in 1970's so I believe the building itself is already fully depreciated? I believe that there were major renovations done to the apartment - rendering of the outside (but unsure of when this would have been completed, looks newish) and decking out the back. I'll have receipts for all the kitchen renovations and any tradies that we get in.

Thanks!

 

[skater]

Have a chat with Depreciator (on the forum). He'll let you know.

 

[depreciator]

Smator, see what the strata manager can tell you about the improvements. You will be able to depreciate them.
Inside your flat, there will be depreciation on the work you are doing as well as on the Assets you are not touching e.g HWS, floor coverings, curtains/blinds.
Send me some photos of the exterior if you happen to have them.

Scott

 

[tonyc00]

Hi

I note that smartor mentioned, "I bought a one bedroom apartment which settled in January this year. I'm currently renovating the kitchen.."

I understood that the rule was "If renovations are undertaken soon after purchase, the tax office deems them as having no value."

Source http://www.yourinvestmentpropertyma...tors-never-claim-after-renovating-146395.aspx

However I would be interested in any other comments.

Tony

 

[Paul@PFI]

Tony - That's not quite correct.

The ATO consider initial repairs to be non-deductible as these are costs incurred to bring the property to its income producing state. This reflects that a buyer has paid less for the evident defects and that fixing them represents a cost not unlike the acquisition cost.

The costs are capital expenditure. Cap ex would mean the cost is eligible for consideration for Div 40 / Div 43 depreciation deductions.

A QS report that incorporates the initial repairs would generally be recommended to convert capex into deductions. The cost as a result would increase the CGT cost base.

 

[depreciator]

Might have been written by a journo, Tony. They sometimes get stuff wrong.

 

[tonyc00]

Hi

Many thanks for the clarification.

Amazing to think that the words that I quoted, "If renovations are undertaken soon after purchase, the tax office deems them as having no value." come from a leading Property Investing magazine.

Hence the reason that I included the source.

Regards

Tony

 

[smator]

Smator, see what the strata manager can tell you about the improvements. You will be able to depreciate them.
Inside your flat, there will be depreciation on the work you are doing as well as on the Assets you are not touching e.g HWS, floor coverings, curtains/blinds.
Send me some photos of the exterior if you happen to have them.

Scott

Hi Scott

Thanks for your reply, will call the manager and ask. Is it the year that the improvements happened that is important or cost? From what I've heard from a neighbour, most of the improvements were completed by 2 other owners who were builders and I'm not sure if they charged for it?

Here's an old realestate.com link (dont know how to embed photos) for another one in the block that sold, eighth photo shows the front exterior, 9th shows the back decking (mine doesn't have the overhead covering):

http://www.realestate.com.au/property-unit-vic-parkdale-118979367

From what you're saying its probably worth getting a report done?