Understanding Depreciation Schedule

[hc_andy]

Hi All....

Two questions about interpreting the depreciation schedule and what to do when you replace an item which was on the depreciation schedule.

1/ We had a depreciation schedule done when we purchased an off the plan duplex in 2007. The depreciation schedule has four columns:

Tax Year Ending (30 June) | Capital Works Allowance | Depreciable Assets | Total Depreciation Allowance

2007 | 4,200.7 | 4,124.2 | 8,325.0
2008 | 10,430.4 | 7,896.8 | 18,327.2
2009 | 10,430.4 | 5,850.0 | 16,280.4
.
.
.
2047 | 6,229.7 | 145.3 | 6,375.0

Which column do I use to claim a tax deduction on??? I've been told by a relative that it's the "Depreciable Assets" column - is this right? So for 2009 I would claim $5,850.00???

2/ On another issue, we've replaced the dishwasher this year with a new one.

Original Dishwasher
Estimated Cost: 1,863
Installed Cost: 2,200
Depreciation Rate (%): 15
Depreciation Year 1: 132.9

How does this affect the depreciation schedule now? Do we just deduct $132.9 from each year from the "Depreciable Assets" column above and claim this amount with the new depreciation value of the new dishwasher which we've depreciated using the low value pool at 18% (total cost of new dishwasher is $493).

Am I doing my sums correctly?

Thanks.

Andy

 

[Leikela]

1. Unless I'm missing something, you claim both! The capital works allowance is what you can claim on the building, whereas the depreciable assets column is what you are claiming on all the fittings etc. in the property. You claim both as a tax deduction, but they are just called different things and there's 2 different sections to put them in the rental schedule. The difference between the two is that the capital works allowance deduction reduces your cost base (except for some period in 1990's I think it was where you could 'double dip'), but this isn't a big deal. Best to claim all the deductions as soon as possible. Capital gains tax doesn't come into play until you sell the property which could be years down the track, and besides you halve the gain so effectively lose half the deduction if you didn't claim the building allowance as you go.

2. Technically if you threw the dishwasher away you can claim the entire written down value of it (does your depreciation show each asset separately?) in the year you dispose of it, but you'll have to remove it from the depreciation schedule to stop claiming depreciation. Then you claim depreciation on the new one as you normally would for a new asset.

 

[taxguy]

You should be able to calculate the deductible balancing adjustment from the information you have - I get $1494 as an additional deduction this year, assuming the asset was disposed of on 30 June 09 (though it doesn't actually make a difference, if it were earlier you'd just claim more as the balancing adjustment and less as depreciation).

Going forward you claim 18.75% of the cost of the new dishwasher for 2009, and 37.5% of the written down value (the undeducted bit) each year after that.

But you claim less on the depreciation schedule each year after this - for example 15% x $1494 less in 2010, and 15% x $1270 less in 2011, and so on.

The easiest way is to give your accountant all the information and they can keep track of everything in their software.

 

[hc_andy]

Thanks to Leikela and taxguy for your insightful reply.

So if I understand correctly, I should be claiming the entire "Total Depreciation Allowance" for the year 2009 as a tax deduction (ie: $16,280.40).

As for the dishwasher, you only claim 18.75% of the cost of the new dishwasher for 2009 ($493 x 0.1875 = $92.40), and then 37.5% of the written down value (the undeducted bit) each year after that, so in 2010 we'd claim $400.60 ($493-$92.49) x 0.375 = $150.20 - is my understanding correct??

Then adjust the depreciation schedule accordingly to taxguy's advice - "15% x $1494 less in 2010, and 15% x $1270 less in 2011, and so on."