Building depreciation has gone, is a Chattels Valuation worth it for residential ?

[mrsaneperson]

IRD have now wiped any building depreciation one could claim against rental income for 2012 tax returns & beyond.

Having just purchased a property with 2 seperate rental properties on the one site. I'm considering getting a chattels valuation done so that i can claim depreciation on chattels. I'm told by Valuit that the following items can be put onto a depreciation schedule:
Carpets, HWC, Fencing,Driveway, Decking [lower only], Dishwasher,Oven,Drapes, Log burner, Light fittings & even Postbox etc.

I was surprised that driveway, fencing & decking were included but i guess these items which are very expensive, do deteriorate significantly .

The total valuation of the chattels would be reasonably high & depreciation on some items like carpets would be around 20% per annum.This certainly would be wise to look into.

As i understand if i ever sold the property chattels depreciation is not usually considered recoverable by IRD unlike building depreciation which is, if when the property sold it sold for more.

The cost of a chattels valuation is $600 + GST [2 properties]. It could be very much worth it particularly because 2 properties are on the same title.

Is anyone else considering a chattels valuation on a newly purchased residential rental property ?

[PC]

Yes I would still get one.
Rental chattels get worn out very quickly.
Carpet, curtains, stoves - anything a tenant or their kids can get a hold of.
You depreciate them and also write the remaining value off when they get (frequently) replaced.

[PropertyTutors]

Hi guys

PropertyTutors are running a free webinar on this topic real soon with a well known Chattels Valuation firm

just subscribe on our site for the details

cheers Steve

[spaceman]

Depreciation is like free money from the IRD, the cost of getting the chattels valuation is tax deductible....it's like the IRD is paying you to be able get them to give you money.

Why wouldn't you want that???

Or to put it another way things wear out and are a real cost to you to replace, why wouldn't you want to take advantage of the IRD's allowing you to claim that cost????

Cheers
Spaceman

[Rosco]

If there is a reasonable amount of chattels, then it should make sense.

ie $10,000 carpet at 25% = $2500 depreciation in year one. At 30% tax = $750 tax refund in year one alone, $562.50 in year two.

If you are renovating, then you generally don't need a valuation done, as you can just use the cost price for items you buy.

Ross

[klauster]

Maybe it’s free money in space – but on earth you pay for chattels, used (or mis-treated) they have a high level of wear and tear, and you as investor have replacement costs. I can’t see any money coming from space or the IRD. Wear and tear in rentals are business related and depreciation is a compensation for that – or not?

[Re@der]

Of course it is always better write off all new expenses as a cost immediately and why wouldn't you when they don't depreciate. However I can see the case for new purchases of buildings

[PatMat]

If you are renovating, then you generally don't need a valuation done, as you can just use the cost price for items you buy.

My accountant advised me to get a pre-renovation ValuIt report because all the things I eventually chuck into a skip-bin during the reno can then be immediately written off. Even an old kitchen with stove was valued at a couple hundred dollars, bath tub, curtains, even paint, everything counts. It paid for itself.

[spaceman]

Maybe it’s free money in space – but on earth you pay for chattels, used (or mis-treated) they have a high level of wear and tear, and you as investor have replacement costs. I can’t see any money coming from space or the IRD. Wear and tear in rentals are business related and depreciation is a compensation for that – or not?

????WTF??? Are you high??......can I have some of what you're smoking?????....please.

If you don't claim depreciation you get no money from the IRD = no free money
If you claim depreciation you "get" money from the IRD = free money

It's not actually free money of course which is why I said........Depreciation is like free money from the IRD......If you claim depreciation the IRD will allow it, if you don't claim you will have to bear the cost with your "after-tax" dollars instead of your "before-tax" dollars.

IMHO anytime you can change from paying with "after-tax" dollars to "before-tax" dollars it's like getting free money from the IRD......I like free money.

Cheers
Spaceman

[klauster]

PatMat, following the IRD chattel definition – I would be very worry about writing off paint.

When depreciating and replacing damaged chattels you write off the rest-book value as loss and start again with new ones, thought.

[PatMat]

Not everything was a straight write off of course. Can't remember about paint but the old kitchen cupboards and stuff like that it was. Accountant worked that out from the Valuit report and my comments on what has been done.

[Re@der]

Paint is not a capital cost it is an expense fully claimed in the year it occurred.( A "before tax dollar" spend in space language.)

[Rosco]

My accountant advised me to get a pre-renovation ValuIt report because all the things I eventually chuck into a skip-bin during the reno can then be immediately written off. Even an old kitchen with stove was valued at a couple hundred dollars, bath tub, curtains, even paint, everything counts. It paid for itself.

If you had purchased, then rented for a while (say 6-12 months), then what you are saying is fine. You depreciate the assets as used for rental business, then if they are put in the skip-bin, then you have written them off. No problem. Then any new assets, you use cost price as the cost for depreciation purposes.

But if you renovate straight away, NO. What is the business use?
There is no rental or business use. The lost chattels are a cost of buying a run down property and a cost of purchase, nothing to do with the ongoing rental business. The new chattels would obviously be allowed as assets and depreciated. Any items incurred at the start that are normaly repairs and not, they are a cost of buying the property.

Ross

[mrsaneperson]

I think a lot of landlords, don't understand that even though IRD new rules on "building depreciation" mean its no longer claimable , chattels depreciation still is..But only if you obtain a separate valuation report for chattels at the beginning of purchase.This might be important advice many accountants overlook & dont inform their clients.

[Dood]

would it be too late to get a valuation for the year ended 31 march 2012? No additions or ammendments have been made to the property in the last six months?