melaniee

Is it worth getting a tax depreciation report done on an investment/rental place for tax purposes ? Are there specialist people that do these and do they cost much ?

MartinLuther

I'd say yes. In the second year the depreciation on my rental was something like $13k which was a tax saving of $3900.

I used http://www.austtaxonline.com.au/

The top bloke's spelling is not the best (he's foreign) but can't complain about the work. I think the charge was $660 (inc GST) and he did it off photos, plans and other info that I sent. They'll visit if you want but it'll cost more.

northernlights

Definately get a tax depreciation report, you'd be mad not to. The newer your house and fittings, the more depreciation you'll get.

Try Deppro, they charge around $500 or alternatively do it yourself as post above.

http://www.deppro.com/

Geelong Gent

We have used these guys as well

ozhappy981

1. Definitely worth it! For example, if the report says the construction cost of your property is $150,000, you can claim $3,750 as a deduction every year you own and rent the property (2.5% for 40 years from the date of construction).

2. If the property was built after 13/5/1997, you need the report anyway when you come to sell the house. Therefore, you might as well get it done now and benefit from it every year until you come to sell .

3. The report will cost around $700. But this is fully tax deductoble as well (just keep the invoice).

4. You need a fully qualified and accredited surveyor. You can find someone in your area through this website: www.aiqs.com.au

melaniee

The house was built approx. 1994-is it still worth it ?

Also-why do we need the report when it comes to sell ?

ozhappy981

I guess you didn't read what I wrote before, so here it is again:

You get to claim 2.5% of the constrcution cost as a write-off every year for 40 years (as long as you own and rent the property). If the house was built in 1994, that means you get to claim it until 2034!

If the construction cost is $150,000 you get to claim $3,750 EVERY year. The more you can claim, the less tax you pay. (And this one is for a one-off cost of about $700 fully tax deductible). No offence ... but you'd be stupid not to get it done.

When you come to sell it you need to calculate your capital gain or loss. For properties bought after 13/5/1997, the construction write-off needs to be taken into account when calculating the gain/loss - that's just one of the rules.

Genevieve

It's definitely worth it, we have got depreciation schedules for all our properties, the youngest of which was build in the '70s. We also have used Australian Tax Depreciation Services and can recommend them - they say they will get you your fee back in the first year or they'll give you a refund (or something along those lines).

Ian12

No No No -- I was ripped off 3.5 GBPs for next to worthless info. Don't do it.

asprilla

Does the ATO insist on people obtaining these depreciation schedules?

i.e. - can a person just put together their own schedule?


I read somewhere that if a person claims depreciation on a building, then the ATO require that the depreciation schedule must be put together by a surveyor? Or something along those lines....

themerlin

I'm not sure if it's worth it in the long run.

If for example you buy your place for $300k and over 5 years write off 50k worth of value.
If after the 5 years you sell the house for $350k you will then have to pay capital gains tax not on 50k but on 100k and this extra tax might be at a higher rate.
So what you have saved off your income tax you pay back at a higher rate.

MartinLuther

It's unlikely to be at a higher rate as you get a 50% discount after 1 year. So taking the top rate 45% the tax would be no more than 22.5% + 1.5% medicare = 24% which is still less than the typical 31.5%.

Geelong Gent

The onus is on the taxpayer to backup the value claims.

Copy of invoice or contract agreements should be sufficient for just an overall house.

Where it gets more complex are existing fixtures & fittings which require or should I say could enjoy more accelerated depreciation ie above 2.5%. The best way in this situation is to have a surveyor put a value on it.

asprilla

Thanks for that.

ozhappy981

The above is completely wrong!!!

1. If you buy the place for $300k, then that purchase price is NOT the construction cost! The construction cost is the cost of materials and labour when it was built!

2. Even if you bought a house with a construction cost of $300k, you could NOT write off $50k over 5 years. You can only claim 2.5% of the construction cost each year. On a $300k construction cost that is $7,500 per year (and that is $37,500 over five years).

3. However, a house with a purchase price of $300k is more likely to have a constrcution cost of $150k. Over five years the construction cost write-off would be $18,750. You then sell the house for $350k.

To calculate your gain/loss, you are allowed to add all your costs for buying the property (stamp duty, legal costs etc) to the purchase price. You are also allowed to add all the costs incurred in selling the house to the original purchase price (e.g. agent's commission, advertising, legal fees). Let's say the total incidental costs came to $20,000.

Your adjusted "cost" for the house is now $320,000. Less the constrcution write-offs claimed ($18,750) gives you $301,250. Less the sale proceeds of $350,000 gives you a gross gain of $48,750. As you had the house for more than 12 months, this is halved, giving you a net gain of $24,375 (and if you held the property in joined names, this is halved again).

The net gain is taken into your tax return and added to your other assessable income.

Australia has no special capital gains tax rates. There is therefore no "higher rate" payable on the gain. It gets taxed at the same rate(s) as all your other income.