Write off carpet

[thetom]

Hi,

I have had a bit of bad luck with a particular property and replaced the carpets due to malicious damage from tenant earlier in the financial year. Tenant did a runner and had replaced with what seemed like better tenants. The most recent tenants have since also done a runner after destroying the new carpet.

My question is can you claim the write off of the carpet replacement twice in a financial year? It has been an insurance job both times and we will defiantly be screening our tenants better.

Thanks for you help

Tom

 

[Propertunity]

My question is can you claim the write off of the carpet replacement twice in a financial year? It has been an insurance job both times....

Why do you have to write it off? You have not suffered any loss as your insurance company is replacing it.

 

[thetom]

Why do you have to write it off? You have not suffered any loss as your insurance company is replacing it.

I thought that the carpets would be written off to offset the income from the insurance payout.

 

[Paul@PFI]

The original carpet on a depn schedule only can be written off. ie the one being replaced the first time around. Thereafter the replacement paid by the insurer cant be written off unless you also show a assessable receipt. A zero sum game then since within the same year one may equal the other. And if you do this you would have two assessable amounts, one original scrapped, one replacement scrapped and be left with one to depreciate. Possibly with a net assessable balance...Why bother ?

When a major insurance claim occurs I recommend a QS report update to determine depreciation deductions going forward. Photo's etc. Not worth it in this case.

This may be a case of a PM not vetting tenants well.

 

[Propertunity]

I thought that the carpets would be written off to offset the income from the insurance payout.

I suppose so, if you got cash from your insurer rather than the actual carpet itself??

Cash income from insurer minus cost of carpet purchase from shop = zero sum game.

*edit* I see Paul answered already as I was typing.

 

[dan c]

The basic answer is yes you can.

The first carpet is written off, the replacement is added to the depreciation schedule to offset the income received from insurance.

After the second tenant leaves, that carpet that has been added to depreciation in the current year is also scrapped. The replacement for the replacement is then added to the depreciation schedule.

So in the financial year you will have two insurance payouts as income, the balance of the first carpet written off, the second carpet totally written off and some depreciation on the third carpet.

 

[dan c]

I suppose so, if you got cash from your insurer rather than the actual carpet itself??

Cash income from insurer minus cost of carpet purchase from shop = zero sum game.

It's only a zero sum game if the amount of the insurance payout matches the cost of the new carpet. Most insurance policies have some form of excess that the OP would have to fund out of his own pocket.

 

[Paul@PFI]

I had a client lose the whole property to a fire. The insurer payout was assessable as rebuild would have triggered a rollover but they didn't opt to rebuild within the time limit

So assessable proceeds of the payout less the WDV of depreciable and CA items was a rather large assessable sum which was used by bank to payout the debt. So not much cash but a decent tax bill. One catch to the system of using a QS report.

Like Dan mentions sometimes cashflows wont line up.