Building depreciation has gone, is a Chattels Valuation worth it for residential ?

[Rosco]

would it be too late to get a valuation for the year ended 31 march 2012? No additions or ammendments have been made to the property in the last six months?

Ideally you want to get the chattels valuation and apply it, before you file the first tax return. So if purchased say May 11, then first income year is ending 31/3/12. So should get chattels valuation now, before filing 2012 income tax return.

IRD don't really like people changing from just building to seperate chattels, but many think they are technically wrong on this.

Ross

[mrsaneperson]

Just wondered if bathroom & kitchens can be valued separately in a chattels valuation? Those types of furnishings are the most renewed & renovated.

My last chattels valuation also had a costing for the electrical wiring. Is this still eligible as a depreciating asset?

Also if am converting an attached garage into a bathroom with laundry which will improve my rental income plus tenant now will no longer need to share a laundry is this claimable as an expense?

[gumbii]

I was in this same position deciding whether or not to get a professional Chatels valuation. In the end I decided I would get one done and was so pleased that I did.

My (conservative) estimate of chatels value was around $16k. I wasn't exactly sure what could and couldn't be included so I went on the safe side. I wrote it all up on a form my accountant gave me but then I decided I would get a valuation firm in anyway to give me more confidence in my numbers.

The valuation came back at $49700! The valuation has paid for itself after about 2 months!

[mattinvestor]

im from Australia - now why did IRD remove buildings depreciation?

[Ahar]

im from Australia - now why did IRD remove buildings depreciation?

I believe the IRD/govt was off the opinion that due to inflation and the housing boom, most buildings go up in value not down...... i.e. the wear and tear/depn is less than the expected increase in value....hence no need to depreciate.

The govt also reclassified a number of chattels..... e.g. kitchens, bathroom fittings, wiring and plumbing are no longer chattels but are now part of the building. This will no doubt substantially reduce any further depn claims and hence reduce the tax advantage currently enjoyed by us "greedy" LLs

But the real reason was.......

• to discourage LLs from rorting the system by obtaining an "unfair" tax advantage.....unfair meaning most LLs got a tax refund
• to "encourage" those with money to invest in productive assets....i.e. anything but rental housing
• and finally, with LL's now out of the buying market, it was going to reduce house price inflation and make housing more affordable to the home owner/first-time-purhaser

If it wasn't so sad it would be funny

[spaceman]

With fewer words than Ahar

im from Australia - now why did IRD remove buildings depreciation?

To increase their revenue.

Cheers
Spaceman

[Rosco]

I was in this same position deciding whether or not to get a professional Chatels valuation. In the end I decided I would get one done and was so pleased that I did.

My (conservative) estimate of chatels value was around $16k. I wasn't exactly sure what could and couldn't be included so I went on the safe side. I wrote it all up on a form my accountant gave me but then I decided I would get a valuation firm in anyway to give me more confidence in my numbers.

The valuation came back at $49700! The valuation has paid for itself after about 2 months!

Just remember that not everything on the chattels valuation report is necessarily claimable as a seperate chattel. Keep well away from claiming depreciation on partitions, electrical wiring, plumbing etc, as these are definitely part of the building!

Ross

[artemis]

I would recommend reading the IRD document IS10/01 Residential Rental Properties—Depreciation of Items of Depreciable Property which sets out a 3 step test for determining what is separately depreciable and gives examples. IS10/02 might also be useful -covers what is a 'building'.

[gumbii]

Just remember that not everything on the chattels valuation report is necessarily claimable as a seperate chattel. Keep well away from claiming depreciation on partitions, electrical wiring, plumbing etc, as these are definitely part of the building!

Ross

I was making an assumption (but we all know what they say about assumptions) that everything stated on a Chatels valuation would in fact be claimable as a Chatel. Is that not correct?

[Ahar]

Not the accountant here......but.....

I should thnk it depends on when the chattels valuation was done...... e.g the valuation on my rentals is now "incorrect" in that a substantial proportion of "chattels" are now "building" and hence now not depreciable.....my accountant will adjust further depn claims

I sudder to think that the valuers are incorrectly classifying such things as kitchens, bathrooms, plumbing etc.....they are all well aware of the law change.

But be aware of buying an IP where the vendor/agent "helpfully" provides you with an outdated list of chattels or claims that the depn will be/should be such and such figure.

[Wayne]

Not the accountant here......but.....

I should thnk it depends on when the chattels valuation was done...... e.g the valuation on my rentals is now "incorrect" in that a substantial proportion of "chattels" are now "building" and hence now not depreciable.....my accountant will adjust further depn claims

I sudder to think that the valuers are incorrectly classifying such things as kitchens, bathrooms, plumbing etc.....they are all well aware of the law change.

But be aware of buying an IP where the vendor/agent "helpfully" provides you with an outdated list of chattels or claims that the depn will be/should be such and such figure.

The chattels valuation will seperate all the items out - doesn't mean that they can be depreciated seperately from the building. All I do is depreciate the 'building' ons at 0% - that way if the rules change again late I still have a starting valuation.

[Rosco]

I was making an assumption (but we all know what they say about assumptions) that everything stated on a Chatels valuation would in fact be claimable as a Chatel. Is that not correct?

Depends on the valuation and who did it. But generally not all items claimable. Many are now building, and no depreciation.

If you read a chattels valuation it generally recommends that you seek specialist tax or accounting advice!

Ross