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  • Chattels Appraisals Update

    Hi Guys

    Received this today. I hope Kieran doesn't mind it appearing here.

    109 Mt Eden Road
    Mt Eden, Auckland
    Phone: 09 638 3350
    Fax: 09 638 3351
    email: [email protected]

    Chattels Appraisals Update - 18th March 2004


    Depreciation as a political football?
    By David Whitburn LLB,BSc
    Director - Hybrid Chattels Appraisals Ltd

    Government views

    Depreciation is a complex field, which is becoming more of a political
    football recently. Various politicians have stated their opinions on
    depreciation over the past 6 months, some saying that it should be
    scrapped completely, because ‘property always goes up in value’. This is
    obviously not the case with property values indeed falling in New Zealand
    in both 1991 and 1998 for example.

    It was recently reported in the media that a Government issues paper on
    depreciation will be out next month. We know Dr Cullen’s views on
    depreciation and they are not at all investor friendly.

    I have to point out that it is ridiculous to say that chattels in rental
    properties go up in value. I am sure many of you, like me have had to
    replace some chattels in your investment properties. Alone over the past
    two months I have replaced dilapidated curtains, some plumbing fixtures
    and piping, worn carpets, light fittings and electrical wiring on a couple
    of my rental properties.

    Rest assured that Hybrid Chattels Appraisals will keep a very close eye on
    any proposed amendments to depreciation rates in this regard, and we will
    be making very strong submissions with the Hybrid Group to represent
    property investors in the event any adverse changes are proposed.

    Some Inland Revenue views

    >From some accountants we have heard that a couple of IRD investigators
    have audited their clients and ruled that certain items like electrical
    reticulation and non-load bearing walls should be incorporated in building
    structure and depreciated at 4% DV. The legal basis of these
    investigators findings is rather questionable. Their findings are akin to
    parking in a designated 60 minute parking zone (P60), and then getting a
    ticket for parking there for only 45 minutes! The concern the IRD had was
    that the investors’ concerned were claiming too much depreciation!
    Shouldn’t how much depreciation claimable be an objective measure governed
    by legislation and regulations, not a subjective measure decided by the
    whim of a couple of IRD investigators?

    The vast majority of other items apportioned out in the chattels appraisal
    were left untouched. The accountants with clients’ tax returns being
    amended as a result are objecting, so watch this space in the future.

    It seems that the only approach to take is to not be overly bullish and to
    be realistic when appraising chattels and fit out values, as well as
    accurately applying the laws and methodologies in devising how a chattels
    appraisal should be carried out. The Income Tax Act 1994, Inland Revenue
    publications IR260 and IR264, and plant and machinery valuation standards
    govern chattels apportionment best practice methodology, which Hybrid
    Chattels Appraisals adhere to.

    What is depreciable?
    The IRD do not let you claim depreciation for land as obviously it does
    not wear out over time (unless you are the owner of a property with a mine
    underneath it, on a river bank or a cliff edge!) However you can claim
    depreciation for the improvements. This can be further broken down into
    building structure, and building fit-out and chattels. In addition, how
    the IRD define chattels, and how registered valuers define chattels are
    fortunately completely different.

    Recent example

    Take for example, a slightly tired looking early-1990s built property we
    appraised only recently. The client had just bought the property at
    registered valuation for $250,000. This valuation showed land value of
    $117,000, with the improvement/building structure value of $127,000 and
    chattels of just $6,000. This would give the investor depreciation of
    just $5,800 per annum. However, with a Hybrid Chattels Appraisal report,
    the depreciation was much better at $10,845. This gave the client a
    further $5,045 in expenses, or an actual cash saving of $1,665, for which
    they only had to outlay a small but tax deductible one-off amount.

    So what is the small outlay?

    The inspection and appraisal of an Auckland dwelling is a low $330 (incl.
    GST) if paid in advance of undertaking the property review and inspection,
    or $360 (incl. GST) if paid on invoice (which comes with the report). For
    furniture and multiple properties we price separately and also highly

    So if you have purchased a property, and want to maximise the depreciation
    you are getting, or are banking some profits by selling a property, you
    will need a chattels appraisal so call us on 638-3350 or e-mail Troy
    Patchett, [email protected] or David Whitburn, [email protected] to book a
    Hybrid Chattels Appraisal.


    Brought to you by THE HYBRID GROUP of companies

    "Adding tangible value to your real estate investment activities"


    Hybrid Property Consulting Ltd

    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx

  • #2
    Thanks Muppet,

    You are quick!
    I was going to post this article on PT anyway but you beat me to it...

    Are you permanently on-line? Because you don't seem to miss anything!
    Kieran Trass


    • #3
      Hi Kieran

      Sorry about that. Got to keep my tally up some how.

      I received it via email last week and then I saw that CraigT from Landlords had posted it so I thought that it had to be on PT as well so I copy and pasted it.

      It is too good an article not to have it out in the public domain.

      Keep the newsletters coming.

      "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx


      • #4
        Hi Muppet
        Thanks for that info re depreciation.
        I have just e-mailed Hybrid for some info as I have purchased a rental in Kerikeri, Northland.
        There sure is a heap to learn when you start getting into the investment property arena!




        • #5
          I take it they are the same as Valuit. I'm thinking about getting them in to do chattels valuations on my IP's.


          • #6
            Originally posted by paulette
            I take it they are the same as Valuit.
            I'm sure that they wouldn't agree that they are the same, however, thy both provide a chattel appraisal service to investors!

            Hybrid offer lots of other services as well - Valuit focus on valuations.



            • #7
              Thanks for that, I hope I didn't offend anyone. I will give them a call.


              • #8
                Just a note, since the first post was posted there has been some changes. In May 2005 the Government released its budget. In the budget there are some proposed changes to how depreciation is calculated on the building structure for buildings/ dwellings purchased on or after 19 May 2005. In addition some of the depreciation rates for chattel items have been changed (generally increased). These changes resulted from the Discussion Document that was issued in June 2004.

                For full information please feel free to visit our website where we keep an update of the changes. http://www.valuit.co.nz/currentissues_may2005.asp