Chattel valuation

[Palmtree]

I bought a 40 years old house last year as a rental property. I have done renovation since i bought it. I have received the draft accounts done by my accountant, there are hardly any chattel depreciation on it. They advice me to get a chattel valuation before we fill the tax return for 2014.

My question is:

1. For a old house, is that worth to spend $400+gst to get chattel valued?

2, There are so many landlord didn't have the chattel valuation, but I am sure they would still claim depreciation. How did they do it? Why my accounting firm insist on it? I thought if i provide them a list of chattel with the value i think it might worth with comparison from website like Trademe would be fine

3, Also, if you have a new house that you lived for 3 years, then you rent out. How are you going to calculate the openbook value? (This is a question related to our own house)

The original cost - depreciation for the first 3 years =open book value on 4th year?????

Much appreciated for your reply!!

[Rosco]

Hi Palmtree,

Sometime it depends on the information provided, and they might just need more info from you

a) From your renovations, any chattels you purchased become an asset at your cost value. So maybe carpets, curtains and a new stove might have been new items you purchased, so should be on your asset schedule at cost

b) Other chattels that were already in the property before you renovated, can be depreciated at cost value. The issue is establishing, what is this cost? In my opinion it would be difficult to get a realistic value for these items from trademe, ie how much are your paths worth as they aren't for sale on trademe.
- So you generally have options of
1) claim nothing for these as you can't establish the cost. For cheap, older houses, this is quite often the option taken
2) get a chattels valuation done, and only www.valuit.co.nz seems to do these right. cost around $400

Your questions
1) depends, how much chattels and what value? Main items are carpet, curtains, dishwasher, stove and heating. If you are saving tax at 33% and these are worth over $3,000, then over time you would get back $1,000. So spending $400-$500 on valuation would be worthwhile. If under $3,000 or lower tax rate, then it might not. There are lots of smaller chattels or chattels that last longer, and these do add up as well. Check out www.valuit.co.nz and they have some more info.

You know the house and level of chattels before the renovation, so really only you can make this call.

2) Some are dodgy, and just claim anything possible without any information to support their claims. Some use the land and building valuation of say $5,000 for chattels, but the issue is what are these chattels? Some claim nothing, which is more correct if you have nothing to support the values.

3) Get a valuation from www.valuit.co.nz at that time, to establish the value of the chattels. If 3 year old house, would be worth it!

Another thing to watch for - If you purchased the property, and then did renovations such as painting, new bathroom etc, these are NOT repairs. It is a cost of buying the property, and with 0% depreciation no claim is available for these items.

Ross

[Rosco]

Also if you had old carpet in the property, but ripped it up and threw it out. Then there would be no claim for this, as just a cost of buying and doing up the property. Not a loss on sale or a repair, or an ongoing depreciable asset.

Ross

[klauster]

Rosco pointed you in the right direction.

The open book value: at start renting, establishing a chattel list should not be the problem.
Age, condition, duration - download the chattel booklet from the IRD
Everything new, the purchase price is the start book value.
How can the accountant do it for you?

When renting out - do you provide for tenants a move-in inspection list with all chattels provided?
In accordance with your records instruct your accountant.

[Palmtree]

Thanks for your reply! Rosco and Klauster

I think the value of my older house may not be worth to do a chattel valuation. But can i still claim depreciation on all of new chattels i bought during the renovation ?

Thanks

[Rosco]

yes - can claim depreciation on all chattels purchased at cost price

Ross

[shanti]

What happens if you purchases a home and income and then re-furbish the income portion to let out but lived in the main building?
This is basically a "mixed use - part business part personal situation right?" So all chattels in the minor unit would be depreciated from new. What about the painting and carpeting?

[Rosco]

Painting - You can't depreciate painting as it isn't a depreciable asset, it is part of the building.
If you purchased the property(or coverted it to a rental), then painted it straight away, then this is a cost of the building and not claimable.
If you own the property for a reasonable period (as a rental), then painting is a repair

Carpet - If new, then depreciate based on cost price.
From your post I'm guessing this already in the property, so it is a matter of establishing the opening value, so that you can start depreciating. Valuit chattels valuation is the best option, but sometimes not worth while if it is a lower value property. Difficulty otherwise is trying to establish the opening value.

Ross