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"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.
Originally Posted by 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
Just don't do any R&M on a rental.
Slum lords one and all ;-)
‘Own things they can’t print.’
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!
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 Barnett, Coombe Smith Property Accountants - Hamilton
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Is kitchen really non-depreciable? My ValuIt report even had "non-structural walls" as separate items.
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?
‘Own things they can’t print.’
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.
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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.
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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