18th October 2019: Three Key Triggers Telling You To Get A Depreciation Schedule

Brought to you by MCG Quantity Surveyors

Let's start with a way you can all but guarantee that you need a depreciation schedule.

1. The property in question commenced construction after the 16th of September 1987

If the property was built after this date, it means that you'll be able to claim depreciation deductions on the value of the original building structure. These deductions are referred to as division 43 if you want to get nerdy. It's a key trigger because worst case scenario, the report is going to be paying for itself.

2. The property has been extended, had a new kitchen and bathroom after the 16th of September 1987

Like the above, but based on the improvements, you'll be able to claim 2.5% of the value of the new building works/renovations each year from the date of completion for 40 years, whether the works were done by the previous owner or yourself.

Therefore, you cannot simply say that a property built in the '60s won't be worthwhile. Regardless, people are given this advice daily. So, the original structure won't qualify if built before the 1987 date, but the renovations will if after 1987 (structural things like paths and fences would need to be after 26th of February 1992). The trick now is knowing the rough value of the work being done. For every $100,000 worth of building renovations, you're able to claim $2,500 of deductions each year. A quantity surveyor would need to estimate the value of these works if they were done by the previous owner, but anything over around $40,000 is likely to produce some worthwhile claims and most people can spot a spend of $40,000 on a kitchen and bathroom when they see it. If you're not sure, ask a quantity surveyor.

3. You bought the property brand new

Sounds simple, stupid even right? However, we're still doing depreciation schedules for people that bought new properties and waited too many years to have one done and will subsequently not be able to back claim far enough to capture everything.

The trick now with the depreciation changes is that if you bought after the 9th of May 2017, you'll kill the plant and equipment deductions if you ever decide to move in (plant items are things like carpets, appliances, etc). Also, if you bought prior to the 2017 budget, the property needed to be a rental in the 2016/2017 financial year.

There are plenty of odd cases and nuances, so an enquiry is always worth the cost of a bit of your time, but if you fall under any of these three categories, tax time might be a little more rewarding next financial year.

MCG Quantity Surveyors mcgqs.com.au
1300 795 170 melbourne@mcgqs.com.au