Depreciation Recovery on chattels like appliances

[Kiwi-Frank]

We bought an apartment in 2014, rented it out and started to depreciate appliances (fridge, dishwasher, washing machine dryer, etc)/boiler/carpet. We are planning to sell the apartment - with a profit. Those items will be included into the purchase and not sold individually/separately.

I was wondering if I could get a reply to the following questions:
1. Is depreciation recovery applicable for those items?
2. If so how will that be calculated?
3. Are people adding the depreciated values for those chattels into purchase agreements?

[Anthonyacat]

It is generally considered that the depreciation on chattels is a pretty close approximation to true decrease in market value. In almost every case I've dealt with, chattels are sold at their depreciated value, so no recovery and no loss on sale. Your accountant will handle this for you. If you're doing it yourself, make sure you remember there's no depreciation in the year of sale.

Pretty much no one adds the values for chattels in the purchase agreements.

[Kiwi-Frank]

Hi,
thanks very much.
The year of sales is the tax year right? (from 1st of April)

[Rosco]

Hi Kiwi- Frank,

1) You need to at least consider it.
2) Depreciation recovery is when you sell for more than your closing book value. Your question is probably more, how do you calculate the sale price of each chattels. From a vendor perspective this is often just presumed to be closing book value.
3) As you have put another option is to include in the sale and purchase agreement. If there are reasonable value of chattels, then I would do this. If selling in February for example, you could work out the depreciation to Feb and then deduct this from your closing book value, and then sell at this. That way you effectively get the depreciation from April to Feb (technically is now a loss on sale, but same effect). To do this, you might add a clause into your sale and purchase agreement, stating the individual items and values.

Ross