Non Cash Deductions - Bookkeeper

Hi there,

we have just completed our first tax return re IP and I am not sure my accountant is maximising our return. I need to ask some questions before I challenge my accountant.

1. Fixtures and Fittings. My accountant claims as our IP was built in 1987 technically the fixtures and fittings have already been written off in depreciation and therefore we cannot claim against this. Is this right? This problem may have been created by my QS report which estimates the value of the fixtures & fittings at time of construction. Is that normal for a QS to specify value at construction or should it just be market value at time of purchase? My accountant said my QS report is not very professional. Its only a 1 page document with no depreciation schedule is it worth getting another one done?

2. According to John Fitzgerald, 7 Steps to Wealth, he states under Section 67A of the Tax Act you can pay 10% of the total rental income to your spouse, a friend etc. My accountant seems to think this was a pre GST feature, and since the intro of GST if the spouse was to be paid the Spouse would have to have an ABN number, also he said 10% is way too high, and laughed his head off!! (The IP is in my husband's name only as I (the spouse) do not work, I handle all the in and outs of the property liase with ppty mgr etc).


Julie
(janszj1@hotmail.com)
 

Sim

Administrator
Originally posted by Jagster
This problem may have been created by my QS report which estimates the value of the fixtures & fittings at time of construction. Is that normal for a QS to specify value at construction or should it just be market value at time of purchase? My accountant said my QS report is not very professional. Its only a 1 page document with no depreciation schedule is it worth getting another one done?
My accountant's advice to me was to make sure that your QS specifies values as of the date you choose (ie. purchase date) and preferably creates a full depreciation schedule for you (both DV and PC) - so it makes it easier for you come tax time.
 
More bluntly, your accountant needs a quick kick.

If *you* bought the property in 1987, then he'd be right, but the carpets (and curtains and blinds and stove and etc) are worth whatever they are now, and that's what the QS report should be listing for you. Then you depreciate them as if they are new Iif you don't want to fight the tax office) or at a higher rate if you think you can justify it (ie. the 'life' left in the asset is shorter.

Read the useful booklets on renting and depreciation put out by the tax office and available on the web. Then ask your accountant why they haven't!

Cheers,

Bob
 
HI

Section 67A of the tax act relates to discharging mortgages and tax deductions . . . and mentions nothing abt spouse wages at all.

There are no specific rules with regard to amounts paid to spouses. However, if you would normally pay no more than say 8% to a property manager, you might have problems justifying what you pay to a spouse if you pay more. At the end of the day, you both have to be comfortable with what you put into the tax return though.

The secret is to document everything as should your spouse explaining what he/she does for the money that you pay them. Moreover, actually pay your spouse and do not just do a book entry where you claim that you have paid him/her.

Have fun

Dale
 
thanks heaps everyone, was feeling a bit deflated after lodging my tax return. Will get on the blower in the morning to QS to ask him if report can be updated to SIMS suggestions, Thanks SIM, my accountant should of told me that!

Also thankyou Dale with your advice on the bookkeeping issue.

regards Julie.
 
spoke to my QS he was pretty annoyed that I asked him to specify the prices as at date we purchase the IP
(RE - Sims Comments), he said as an old item it is basically worthless. He said he would relist the items as if they were new of the date of purchase if that is what I wanted, but he said in all his years of doing QS reports he had never been asked that!

Also my accountant has advised me not to bother.

Ho hum, looks like I will be looking elswhere for a QS & Accountant.

Julie
 
Does it really matter if the QS specifies value as at the date of construction or as at date or purchase?

If you had the cost at date of construction and you know the age of the building, can you not use the depreciation rates to work out what their current written down values would be?

For example, if oven was valued at $500 in 1987 then its written down value after 14 years would be x?

(Of course, if newer items have gone into the building since then it gets trickier).

The only problem I see is that pretty much everything would have already been written off after 15 years using this approach, correct?
 
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