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

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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.

  • #2
    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

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    • #3
      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.

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      • #4
        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

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        • #5
          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
          Book a free chat here
          Ross Barnett - Property Accountant

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          • #6
            Is kitchen really non-depreciable? My ValuIt report even had "non-structural walls" as separate items.

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            • #7
              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.

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              • #8
                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, 11:46 AM.

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                • #9
                  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.

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                  • #10
                    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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                    • #11
                      We would be needing an Ikea then

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                      • #12
                        Originally posted by klauster View Post
                        Yes, I found it strange, too - renting in NZ where the tenant can’t have his own kitchen.
                        I think it's because NZ tenants don't tend to stay as long. Also renting here is often more because of a lack of money to buy a house (or a kitchen) than because they want to.
                        My Profile

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                        • #13
                          Originally posted by patmat-co-nz View Post
                          Is kitchen really non-depreciable? My ValuIt report even had "non-structural walls" as separate items.
                          Kitchen definitely not depreciable anymore. Lots of items on valuit reports aren't claimable, and some are in grey area (ie IRD say no, but really should be allowable)

                          Ross
                          Book a free chat here
                          Ross Barnett - Property Accountant

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                          • #14
                            Originally posted by Rosco View Post
                            Kitchen definitely not depreciable anymore. Lots of items on valuit reports aren't claimable, and some are in grey area (ie IRD say no, but really should be allowable)

                            Ross
                            Rosco.....can you pleeeeez clarify for me the following....
                            • I replaced a fence last year....it fell down and couldn't be repaired.....cost of materials $1700, labour $3000....is this part of building? If so, can it be expensed...or just the old value for fence written off....and what happens if the old fence is not on chattels list?


                            • you said the kitchen is not depreciable.....if you replace it, does it mean it can be expensed....or is it just the old kitchen's value written off?


                            • I have a roof that should be replaced...it's asbestos so can't be repaired. Can this be expensed?


                            My accountant has told me that I can only claim the labour costs for the above...nothing for materials

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                            • #15
                              Originally posted by Ahar View Post
                              Rosco.....can you pleeeeez clarify for me the following....
                              • I replaced a fence last year....it fell down and couldn't be repaired.....cost of materials $1700, labour $3000....is this part of building? If so, can it be expensed...or just the old value for fence written off....and what happens if the old fence is not on chattels list?


                              • you said the kitchen is not depreciable.....if you replace it, does it mean it can be expensed....or is it just the old kitchen's value written off?


                              • I have a roof that should be replaced...it's asbestos so can't be repaired. Can this be expensed?


                              My accountant has told me that I can only claim the labour costs for the above...nothing for materials
                              Hi Ahar,

                              I'm sorry but you need to get a new accountant. On what basis can you claim the labour but not the materials? Either the whole thing is claimable as a repair, or it is an asset the can be depreciated, or its a building asset and can't be depreciated.

                              - Fence is not building. So I'd need a bit more information but sounds like an improvement to the fence. Therefore write off old (if there is one) and capitalise the new one. Then claim depreciation on new fence each year

                              - old kitchen is part of building. So difficult to write off. New kitchen, as long as similar level as old one, will be an expense. It is not an improvement to the whole building.

                              - generally the roof woudl be a repair, as is part of building. As long as not improved, ie bigger, longer, extra rooms etc.

                              Ross
                              Book a free chat here
                              Ross Barnett - Property Accountant

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