Go Back  British Expats > Living & Moving Abroad > New Zealand
Reload this Page >

House renting and tax

House renting and tax

Old Apr 3rd 2013, 8:11 pm
  #1  
Queen of the Underworld
Thread Starter
 
Persephone's Avatar
 
Joined: Dec 2007
Location: In NZ!
Posts: 4,785
Persephone has a reputation beyond reputePersephone has a reputation beyond reputePersephone has a reputation beyond reputePersephone has a reputation beyond reputePersephone has a reputation beyond reputePersephone has a reputation beyond reputePersephone has a reputation beyond reputePersephone has a reputation beyond reputePersephone has a reputation beyond reputePersephone has a reputation beyond reputePersephone has a reputation beyond repute
Default House renting and tax

Anyone else on here renting out their property and doing the IR3 themselves? Any tips you can give me? Any pitfalls that will come back to bite me in the arse at sometime in the future? It is the first time I've done an IR3 that involves rental property.

Everything looks fairly straightforward apart from working out depreciation on chattels and I assume that should be easy enough once we assign a value to everything. Do you assign the value for secondhand or new items- they were all secondhand when we moved in, the house was 6 years old at the time. Bought Jan 2010, rented out Nov 2012 onwards. There was no split of house/land/chattel price when we bought it.

Any advice on whether to use the straight line or diminishing value method would be helpful. I can see advantages to either depending on the item but understand I do not have to use the same method for everything.

Can I use the 20% depreciation loading since the house and chattels were bought prior to May 2010 even though the house wasn't rented out until after then?

The building depreciation rate is now 0%-correct?
We do not know how long the house will be rented for so we will not be exempting ourselves from depreciation since this is an irreversible decision.

The answers will probably be obvious to anyone who does do this regularly. Spent 3 hours yesterday hunting for info and have got so much that my head is spinning.

I do have a lot of time on my hands and like playing with numbers but am I an idiot for even trying to do this and not hiring an accountant?
Persephone is offline  
Old Apr 3rd 2013, 9:07 pm
  #2  
I like kittens.
 
downunderpom's Avatar
 
Joined: Oct 2003
Location: In my own little world
Posts: 1,457
downunderpom is a splendid one to beholddownunderpom is a splendid one to beholddownunderpom is a splendid one to beholddownunderpom is a splendid one to beholddownunderpom is a splendid one to beholddownunderpom is a splendid one to beholddownunderpom is a splendid one to beholddownunderpom is a splendid one to beholddownunderpom is a splendid one to beholddownunderpom is a splendid one to beholddownunderpom is a splendid one to behold
Default Re: House renting and tax

While I don't have rental property I do use an accountant for my (and Mrs DUP's) taxes. Just got our refund cheques. The refund is more than 4 times the cost of the accountant.

Just sayin'....
downunderpom is offline  
Old Apr 4th 2013, 7:02 pm
  #3  
Queen of the Underworld
Thread Starter
 
Persephone's Avatar
 
Joined: Dec 2007
Location: In NZ!
Posts: 4,785
Persephone has a reputation beyond reputePersephone has a reputation beyond reputePersephone has a reputation beyond reputePersephone has a reputation beyond reputePersephone has a reputation beyond reputePersephone has a reputation beyond reputePersephone has a reputation beyond reputePersephone has a reputation beyond reputePersephone has a reputation beyond reputePersephone has a reputation beyond reputePersephone has a reputation beyond repute
Default Re: House renting and tax

I have got a 4 figure tax refund every year I've been in NZ, I calculate this myself. I have either worked only part of a year and/or worked for two different employers at the same time. An accountant would have been a waste of money for me as my finances are not complicated. I am not self employed.
I suspect your financial situation is much more complex

My queries are with depreciation-that is really the only area where you can be creative but even then there is a clear list as to what can and what cannot be depreciated. Rates, insurance etc etc are fixed values and easily added up
I am also a bit of a control freak and even if I handed it all over to an accountant I would still want to know how the system worked-how else would you know that you're saving money using one
Persephone is offline  
Old Apr 4th 2013, 7:32 pm
  #4  
BE Forum Addict
 
Woodlea's Avatar
 
Joined: Apr 2006
Location: Rangiora
Posts: 1,201
Woodlea has a reputation beyond reputeWoodlea has a reputation beyond reputeWoodlea has a reputation beyond reputeWoodlea has a reputation beyond reputeWoodlea has a reputation beyond reputeWoodlea has a reputation beyond reputeWoodlea has a reputation beyond reputeWoodlea has a reputation beyond reputeWoodlea has a reputation beyond reputeWoodlea has a reputation beyond reputeWoodlea has a reputation beyond repute
Default Re: House renting and tax

Originally Posted by Persephone View Post
Anyone else on here renting out their property and doing the IR3 themselves? Any tips you can give me? Any pitfalls that will come back to bite me in the arse at sometime in the future? It is the first time I've done an IR3 that involves rental property.

Everything looks fairly straightforward apart from working out depreciation on chattels and I assume that should be easy enough once we assign a value to everything. Do you assign the value for secondhand or new items- they were all secondhand when we moved in, the house was 6 years old at the time. Bought Jan 2010, rented out Nov 2012 onwards. There was no split of house/land/chattel price when we bought it.

Any advice on whether to use the straight line or diminishing value method would be helpful. I can see advantages to either depending on the item but understand I do not have to use the same method for everything.

Can I use the 20% depreciation loading since the house and chattels were bought prior to May 2010 even though the house wasn't rented out until after then?

The building depreciation rate is now 0%-correct?
We do not know how long the house will be rented for so we will not be exempting ourselves from depreciation since this is an irreversible decision.

The answers will probably be obvious to anyone who does do this regularly. Spent 3 hours yesterday hunting for info and have got so much that my head is spinning.

I do have a lot of time on my hands and like playing with numbers but am I an idiot for even trying to do this and not hiring an accountant?
As you say it is fairly straight forward and not worth hiring a bean counter. I just use diminishing value and 'guessed' the value of the items at the time of the commencement of the original let. Yes building depreciation is 0%. I don't know about the 20% loading - sorry.
Woodlea is offline  
Old Apr 4th 2013, 8:40 pm
  #5  
Queen of the Underworld
Thread Starter
 
Persephone's Avatar
 
Joined: Dec 2007
Location: In NZ!
Posts: 4,785
Persephone has a reputation beyond reputePersephone has a reputation beyond reputePersephone has a reputation beyond reputePersephone has a reputation beyond reputePersephone has a reputation beyond reputePersephone has a reputation beyond reputePersephone has a reputation beyond reputePersephone has a reputation beyond reputePersephone has a reputation beyond reputePersephone has a reputation beyond reputePersephone has a reputation beyond repute
Default Re: House renting and tax

Originally Posted by Woodlea View Post
As you say it is fairly straight forward and not worth hiring a bean counter. I just use diminishing value and 'guessed' the value of the items at the time of the commencement of the original let. Yes building depreciation is 0%. I don't know about the 20% loading - sorry.
Thanks Woodlea. My impression is that chattel value is always going to be a guesstimate even if someone professional comes and does it. As long as I can justify the values to IRD if necessary. I need to find out about the loading rate
Why did you choose to use the diminishing value method rather than the straight line method?
I may work out the difference over the years when using each method to see how they compare. None of the chattels are nearing the end of their useful life so no plans to replace them soon. Selling chattels and our possible tax burden [dependent on selling price] looks simple to deal with as well.

Nice to hear it's fairly straightforward. That's what I thought even though I have a couple of queries about things. Once the chattel values are assessed then it's just working out the depreciation using percentages each year.

Maths has always been my strong point [and it's only basic addition, subtraction and percentages] so doing it does not phase me at all, yeah I'm a geek

Last edited by Persephone; Apr 4th 2013 at 9:09 pm.
Persephone is offline  
Old Apr 4th 2013, 11:00 pm
  #6  
BE Forum Addict
 
Woodlea's Avatar
 
Joined: Apr 2006
Location: Rangiora
Posts: 1,201
Woodlea has a reputation beyond reputeWoodlea has a reputation beyond reputeWoodlea has a reputation beyond reputeWoodlea has a reputation beyond reputeWoodlea has a reputation beyond reputeWoodlea has a reputation beyond reputeWoodlea has a reputation beyond reputeWoodlea has a reputation beyond reputeWoodlea has a reputation beyond reputeWoodlea has a reputation beyond reputeWoodlea has a reputation beyond repute
Default Re: House renting and tax

Originally Posted by Persephone View Post
Why did you choose to use the diminishing value method rather than the straight line method?
It just seemed more logical - I didn't really understand the straight line method (Maths was never my strong point!!)
Woodlea is offline  
Old Apr 5th 2013, 6:10 pm
  #7  
Queen of the Underworld
Thread Starter
 
Persephone's Avatar
 
Joined: Dec 2007
Location: In NZ!
Posts: 4,785
Persephone has a reputation beyond reputePersephone has a reputation beyond reputePersephone has a reputation beyond reputePersephone has a reputation beyond reputePersephone has a reputation beyond reputePersephone has a reputation beyond reputePersephone has a reputation beyond reputePersephone has a reputation beyond reputePersephone has a reputation beyond reputePersephone has a reputation beyond reputePersephone has a reputation beyond repute
Default Re: House renting and tax

Thanks!
With the diminishing value method you can never [mathematically] reach $0, though in real world terms you do -I doubt anyone would claim for $0.00001. I presume you write the item off once the adjusted value becomes irrelevant. Your greater deductions are early on and the amounts decrease over the years.
With the straight line method you will reach $0. You deduct the same amount every year until the adjusted tax value becomes less than the percentage deducted.

Neither method results in much of an advantage over the other over time as my back of the envelope scribbles showed!

Going to have a weekend off this tax stuff-I need some relaxation!!!
Persephone is offline  

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Contact Us - Archive - Advertising - Cookie Policy - Privacy Statement - Terms of Service - Do Not Sell My Personal Information

Copyright © 2018 MH Sub I, LLC dba Internet Brands. All rights reserved. Use of this site indicates your consent to the Terms of Use.