Have You Bought an Investment Property in The Last Few Years and Didn't Get a Depreciation Report?

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  geek001 on 25/05/2017 - 14:28

  -3

  I didn't bother, because don't you have to pay it all back when you sell? When you sell at a profit obviously.

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    Associatednicolemcmilllon @ Titanium Accountants & Advisors on 25/05/2017 - 14:34

    +1

    Depreciation no you don't need to add that back.

    You will have to include the building write offs by lowering the value of the purchase price.

    But even then you will get a 50% capital gains discount. You're much better off getting it if its not too late.

    • 

      bemybubble on 03/08/2017 - 15:29

      You still need to do a balancing Adjustment for the depreciation on fixtures and fittings. In other words, add it back…

      http://www.bantacs.com.au/QandA/index.php?xq=104

      • 

        Associatednicolemcmilllon @ Titanium Accountants & Advisors on 04/08/2017 - 03:47

        In the real world no one does a balancing adjustment on depreciated assets because part of the consideration of buying the house is to buy the assets at their current written down value. Therefore the adjustment is nil.

      • 

        bemybubble on 04/08/2017 - 08:08

        @nicolemcmilllon:

        You're partially right Nicole. I used to do it the exact same way.

        If you purchase a property for $400k of which a QS indicates $30k belongs to Fixtures and Fittings. It means your value of your property is $370k with a seperate value of $30k for F & F

        Sell the property for the same price of $400k with nil consideration for the chattels means you would have scrapped all F & F (i.e. depreciated) and left with the cost base of $370k thus leaving a $30k capital gain.

        So in essence you don't really 'add it back' merely account for it seperately but in a round about way 'adding it back' will have the same impact.

        Of course if items are purchased during the year then this would change my example above.

        The bottom line is you are spot on in the fact that clients are way better off. Had a client who's old accountant talked him out of getting a QS report done as 'he would need to pay more tax when he sold it'. But as you describe depreciation is on a 1:1 basis for a deduction and capital gains would attract (in more cases than others) a 50% discount making the client better off.

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        Associatednicolemcmilllon @ Titanium Accountants & Advisors on 04/08/2017 - 08:30

        @bemybubble:

        Correct :)

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  geoffs87 on 25/05/2017 - 15:35

  Hi Nicole,

  I got a depreciation report, best thing i ever did!

  I have another question though, its not necessarily depreciation related, but valuation.

  I'm looking at selling my investment property in a couple of months. I purchased the Ultimo (NSW) unit in April 2011, lived in the property until March 2015, where it was rented from May 2015 until now.

  i didnt get a valuation when i left the property and commenced renting it out. How will the CGT be calculated when it comes time to sell the property? I'm sure i can get a couple of agents to give me an approximation, or i can look at the MoM growth for Ultimo Properties since Apr-15 to (say) Oct-17. Just wondering what the ATO expects and how this is treated!

  Also, when does one pay capital gains tax, is that at EOFY?

  Thanks :)

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  Kommyht on 26/05/2017 - 08:44

  +1

  I religiously get depreciation reports for any newish properties bought.even get reports from multiple providers to see whos estimated the highest depreciations.

  Its not often a single page with a table can knock you down Several tax brackets while actually not making a cashflow loss.

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  Mcbargains on 16/06/2017 - 13:57

  Hi Nicole, purchased an investment property recently and I am currently preparing it for rent. In July I am going to start renovations. Property is largely early 1900s with a more recent extension in 1970/1980. I am wondering if I can claim based on depreciation report when property is not yet available for rent or whether to wait until improvements have been done. Either way, should I get a report prior to EOFY, after EOFY before renovations, after EOFY and after renovations or not at all. Given the age of the property not sure if it's worth it and given not yet ready for rent whether I can claim at all. Appreciate your help!

  • 

    Associatednicolemcmilllon @ Titanium Accountants & Advisors on 16/06/2017 - 14:06

    You can't claim until the property is available for rent.

    What you can do is write off the cost of all the improvements at 2.5% once the place is available for rent.

    eg) if you spend $100k it will be about $2.5k written off every year as a deduction.

    The initial $100k will also form part of the property's cost base for when it comes time to calculate CGT upon sale, but you will have to reduce by the amount written off over the years.

    :)

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  tajid on 03/08/2017 - 07:45

  Hi Nicole,

  One of my IPs was bought In early 2016, I lived in it for 6 months then been rented out.

  A friend of mine bought a similar property. Built & completed about the same time, almost identical size & cost & on the same street. Can I just use his depreciation report or I have to get my own?

  • 

    Associatednicolemcmilllon @ Titanium Accountants & Advisors on 03/08/2017 - 13:47

    You have to get your own. Theyre only about $735. Fully deductible too. BMT Depreciation Reports are one of the main ones everyone uses.