landscaping and tax

[blackenator]

Hi all ,

I had a question about tax and fencing. I am currently building a new premise and being a first home owner I have to live in the premise for 6 months to get the fhog. The house I am building will be completed soon and I have to do the landscaping myself and have been quoted for 5k for the fencing. I wanted to know if the fencing will tax deductible or will it fall under deprecation along with the other landscaping such as turf pavers etc.

Thanks in advance

 

[Terry_w]

Fence would be a capital asset and depreciated.

Landscaping is specifically excluded as a capital asset from memory. Probably you wont be able to claim any of it as an income expense either.

 

[blackenator]

Fence would be a capital asset and depreciated.

Landscaping is specifically excluded as a capital asset from memory. Probably you wont be able to claim any of it as an income expense either.

Ah thank you very much for the good news and the bad news ( insert half smiley face)

 

[coastymike]

Capital works do not include structural improvements in the form of earthworks described in subsection 43-20(4). Similarly, capital expenditure on land (on which the capital works are to be constructed), including clearing, demolition, landscaping costs and plant, is not part of construction expenditure. These are specifically excluded by paragraphs 43-70(2) (a), (b), (c), (d) and (e) of the ITAA 1997.

Pavers would be a depreciable asset.

 

[Paul@PFI]

The problem arises that most landscapers will charge one price and include structural, turf, pavers etc... without apportionment. Retaining walls are structural and are common in landscaping. I have one such issue now. Far easier if its itemised.

BMT were able to assist with guidance. If I can just find the tread....

 

[depreciator]

blackenator, just think of 'hard' vs 'soft' landscaping.

Hard landscaping, like paving, retaining walls, fencing, pergola etc are all built structures and can be claimed at 2.5%.

Soft landscaping, like turf, dirt, plants and bark can't be depreciated.

The reason is in part that depreciation is driven by the ATO designated Effective Lives I.e. How long they think something will last for with fair usage.

A fence has an Effective Life of 40 years, so does a pergola.

A plant could last for ten years, or week.

Scott

 

[blackenator]

blackenator, just think of 'hard' vs 'soft' landscaping.

Hard landscaping, like paving, retaining walls, fencing, pergola etc are all built structures and can be claimed at 2.5%.

Soft landscaping, like turf, dirt, plants and bark can't be depreciated.

The reason is in part that depreciation is driven by the ATO designated Effective Lives I.e. How long they think something will last for with fair usage.

A fence has an Effective Life of 40 years, so does a pergola.

A plant could last for ten years, or week.

Scott

ah thanks you very much this makes a lot more sense now

 

[syba]

blackenator, just think of 'hard' vs 'soft' landscaping.

Hard landscaping, like paving, retaining walls, fencing, pergola etc are all built structures and can be claimed at 2.5%.

Soft landscaping, like turf, dirt, plants and bark can't be depreciated.

The reason is in part that depreciation is driven by the ATO designated Effective Lives I.e. How long they think something will last for with fair usage.

A fence has an Effective Life of 40 years, so does a pergola.

A plant could last for ten years, or week.

Scott

What Scott is saying is a good rule of thumb - if it is hard you can claim it, if soft you can't. However I believe the reason is more to do with what the "improvement" is doing. When you install a hard item like a house, a fence, a driveway, etc you aren't making an improvement to land but installing an item of capital on it. Most capital items depreciate in value over time (ie become less valuable - think of a car as an easy example). When you plant grass, gardens, etc it is more an improvement to the land itself and not of a capital nature. You can't depreciate land. Generally land appreciates in value over time - is hard to depreciate an item that appreciates in value!

 

[BMT Tax Depreciation]

The problem arises that most landscapers will charge one price and include structural, turf, pavers etc... without apportionment. Retaining walls are structural and are common in landscaping. I have one such issue now. Far easier if its itemised.

BMT were able to assist with guidance. If I can just find the tread....

I'll have a look for the thread too.

If we have the overall cost involved and have inspected the property, we'll be able to do any apportioning as necessary. It's what we do!

 

[Paul@PFI]

Chris - No work was done after an inspection and report. Client going back to landscaper.

This issue is common and too many taxpayers would take a DIY approach to apportioning. This generally means they will do it in a way that provides a tax benefit. That's asking for it to be disallowed on review.

IMO - Two issues are a lesson:
1. Get a clear apportioned invoice for all landscape that assists with "hard"/ structural and "soft"; or
2. Get a QS report based on before and after (pics ?) and the actual costs.

 

[blackenator]

Just a question about depreciation is the taxable rate including your rental income? For example if I am on 80k a year without rental income but with rental income I am 100k. Do I get to claim based on the 80k bracket? or the 100k bracket?

 

[Paul@PFI]

Assessable income is the total sum of all income less all deductions.

 

[redwing]

blackenator, just think of 'hard' vs 'soft' landscaping.

Hard landscaping, like paving, retaining walls, fencing, pergola etc are all built structures and can be claimed at 2.5%.

Soft landscaping, like turf, dirt, plants and bark can't be depreciated.

The reason is in part that depreciation is driven by the ATO designated Effective Lives I.e. How long they think something will last for with fair usage.

A fence has an Effective Life of 40 years, so does a pergola.

A plant could last for ten years, or week.

Scott

How about if you installed fake lawn and plants

 

[BMT Tax Depreciation]

How about if you installed fake lawn and plants

Depreciable! It happens, believe it or not.