Who is right? Depreciator or not so property savvy accountant?

I'm about to arrange to have my split PPOR/IP surveyed. It's a four story townhouse, completed in Dec 2007.

60% of the property is owned by me and includes the 'better parts' of the building. 2 bedrooms, 2 bathrooms, the terrace, balcony and kitchen

40% of the property is owned by my family trust, who rents it to my home business. It includes one bathroom, a large bedroom (used as an office), a study and the double garage (converted to an office)

My business accountant argues that the depreciation schedule should reflect the rooms the business uses, whereas the person I spoke to at the survey company today told me they would survey the entire property and simply claim 40% of it. That SEEMS right to me, since even though there's no kitchen etc, that when we sell the full property, the trust would be claiming 40% of the sale.

My accountant is concerned that the tax department is checking depreciation schedules closely and that we should be claiming on the rooms specifically used for the business.

If he's correct, then how would I deal with that upon sale? Surely there would be an argument that the trust gets less than 40% of the sales profit right?

Another example is the $8,000 I spent installing a motorised blind on the terrace. I paid the full amount. Accountant said that when we eventually sell I can argue for that capital expense to be considered and give a slightly smaller than 40% share of sales. This is because the terrace is mostly used personally (debatable actually - I hold meetings up there more often than I use it personally but that's another story)!
 
From what I've read on the ato site, it would seem that apportionment based on floor area is acceptable. Apportionment based on 'which rooms are more valuable' seems very subjective.

When you specify ownership ratios, it's based on percentage, not 'you own this room and this room, and I own the kitchen'. As you say, when you sell, the CG will be apportioned based on the percentage.

To me, just claiming the % per the ownership percentages makes the most sense. I mean, what are you going to say, you personally don't own the bathroom and you don't use it?
 
Thanks. That makes the most sense to be also. It seems stupid that if I make a capital improvement that my accountant doesn't allow me to have the trust cover 40% of the cost even though it will benefit from the sale. Seems to me the same should apply for the depreciation schedule.

I think he is just very wary of the ATO's rulings. My accountant thinks I should put all extra $$ into my PPOR instead of investing as well though. I didn't listen to him on that one so maybe I'll run with what the survey company say.

And yes - contract states me as to 60% interest and trust as to a 40% interest. It doesn't say which rooms I own and which rooms the trust owns!
 
I think he is just very wary of the ATO's rulings. My accountant thinks I should put all extra $$ into my PPOR instead of investing as well though. I didn't listen to him on that one so maybe I'll run with what the survey company say.

Which ATO rulings is he concerned about? Ask him, read them yourself, and make up your own mind.

The PPOR v investing thing is not a tax issue, and accountants aren't financial advisors, so you have to make up your own mind about that.
Alex
 
I know accountants aren't financial advisors and that's why I did make up my own mind :)

I didn't get into detail on the rulings with him. He just said he goes to tax seminars constantly to keep up with the latest and his opinion was that the ATO was looking very closely at IP and what's being claimed. I'll find out and read up on it myself as you suggested. Thanks alexlee
 
I know accountants aren't financial advisors and that's why I did make up my own mind :)

A good one is much better and much more qualified.
Being conservative as opposed to pushing the envelope for a few bux is always the way most accountants would sway, and I agree with them.
Any audit will be limited to a few questions to them and never go further.
As soon as they see anything sus in your records, your may be in for a long "prove it" time.
 
Ummm ...

If I had a pre-85 PPOR with a brand new custom built garage that I used 100% for my business , then I know exactly how much capital works depreciation I would be claiming !!

I think your reference to "floor area" is in the context of claiming actual running expenses like electricity, and perhaps apportioning any CGT on disposal.

Cheers,

Rob
 
My accountant thinks I should put all extra $$ into my PPOR instead of investing as well though. I didn't listen to him on that one so maybe I'll run with what the survey company say.

Well if you had 100k lying around it would be wise to pay down the PPOR, then look at redrawing for investment.
 
Well if you had 100k lying around it would be wise to pay down the PPOR, then look at redrawing for investment.

I did that already. Stuck everything extra into an offset account and some direct onto the mortgage. Then decided to access it to invest and spent months talking hubby into agreeing to it because accountant thought it best to leave it in PPOR.
 
Its easy to get an ATO ruling for your particular case, just go to the ATO website and do it online. That way you know for sure one way or the other.

I had a bit of a disagreement with my accountant a couple of years ago and got an ATO ruling. It ended up the ATO agreed with me rather than the accountant.
 
Aloha (I'm in Hawaii).

Just to clear something up. A QS (like us) would do the whole property and leave it to an accountant/client to work out what percentage of the building cost and Assets to use. We would make determinations on percentage entitlements of owners because that would stray into 'advice' and we don't give advice.

Scott
 
I AM using you guys Scott! Girl on phone didn't 'advise' what I should do - just told me you survey the whole property but indicated she thought that was standard.

Either way I'm going to ask the tax department so I have the ruling because I think I should be able to claim straight up 40% of the entire property being that when it's sold the trust gets 40% of the proceeds
 
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