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  1. #1

    Default "Taxman eyes ‘repair and maintenance’ claims" - any more info?

    Headline from NBR today, but behind the firewall. Anyone have any info on this? I had a look on the IRD site but couldn't see anything recent on this.

  2. #2

    Default

    Quote Originally Posted by artemis View Post
    Headline from NBR today, but behind the firewall. Anyone have any info on this? I had a look on the IRD site but couldn't see anything recent on this.
    Hi artemis,

    I think where IRD will be going with this, is along these lines:

    - True R & M has always been able to be fully expensed in year incurred
    - "Capital" expenses such as renovations and improvements have historically not been able to be expensed in the year incurred, but rather can be added to the building cost and depreciated at 3%
    - Now that building depreciation is gone from 1 April 2011, IRD is going to be worried about people claiming what was historically capital expenses as R & M, as you can no longer claim deprecaition on buildings.

    I hope that makes sense - I am sure Rosco will correct me if I am wrong, but that is my line of thinking

  3. #3
    Join Date
    Apr 2004
    Location
    Auckland
    Posts
    1,435

    Default

    Just don't do any R&M on a rental.
    Obvious really.
    Slum lords one and all ;-)
    The three most harmful addictions are heroin, carbohydrates and a monthly salary - Fred Wilson.

  4. #4
    Join Date
    Jun 2005
    Location
    Auckland
    Posts
    4,776

    Default

    Good, isn't it.

    Over 20 years a Kitchen doesn't depreciate but if you replace it it isn't 'repairs and maintenance' - let's just give the tenant a new kitchen out of the kindness of our hearts!
    DFTBA

  5. #5
    Join Date
    May 2007
    Location
    Hamilton
    Posts
    2,164

    Default

    IRD's normal trick is to say something in the media, and even if not fully correct, a large percentage of people will follow the guidance without questioning it. Therefore IRD wins.

    IRD's statement about what is building for depreciation purposes, works against them for r&m purposes. so if you replace the kitchen, IRD state that the actual asset you are looking at is the building. So most likely you are repairing the building, as the kitchen is only a small part of the building, and as long as the kitchen is a similar level (ie entry level replaced with entry level kitchen) then you aren't improving the whole building.

    Ross
    Coombe Smith Property Accountants www.cswaikato.co.nz
    Are you sick of your Large Auckland Accounting firm charging too much
    for rental accounts? Click here for guaranteed 30% off

  6. #6
    Join Date
    Jun 2011
    Location
    West Auckland
    Posts
    14

    Default

    Is kitchen really non-depreciable? My ValuIt report even had "non-structural walls" as separate items.

  7. #7
    Join Date
    Apr 2004
    Location
    Auckland
    Posts
    1,435

    Default

    New kitchens are barely attached to the house.
    A few screws into the wall for the cupboards.
    The plastic pipe work is all hand screwed together elbows.
    You can easily remove one with minimal damage.
    So they must surely be a chattel now?
    The three most harmful addictions are heroin, carbohydrates and a monthly salary - Fred Wilson.

  8. #8
    Join Date
    Jul 2010
    Location
    Auckland City, why invest else where?
    Posts
    987

    Default

    It's what IRD list as chattels that count, not us landlords and tax payers who pay them...
    Last edited by Perry; 13-04-2012 at 11:46 AM.
    Novice Investor Turning Pro
    If you would like a Super Property Coach to super charge your property investment, call my coach Ron Hoy Fong 021 888 298 today!

  9. #9
    Join Date
    Jul 2011
    Location
    Tauranga
    Posts
    2,132

    Default

    When I was in Germany most rentals /puchases - you provided your own kitchen and took it with you when you left. They found it odd that our came with them and asked me - what if you didn't like the kitchen that came with the place.

  10. #10
    Join Date
    Apr 2011
    Posts
    327

    Default

    Yes, I found it strange, too - renting in NZ where the tenant can’t have his own kitchen.

    From chattel point of view – I see a fine line between built-in cupboards such as a walk-in pantry and kitchen furniture nowadays, you buy as kitset or as designer kitchen.

    By removing everything that is not house or structure let the tenants choose their lifestyle, why should the LL pay without any compensation? And by the way tenants treat their own stuff with more respect – so, the house benefits too.


 

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