Second set of accounts for second IP?

[richard56]

Hi
I have had my first IP for nearly one year now and I have been using an Excel worksheet to keep track of all the money.

This worksheet works great and gives me all the info I need to fill out my IR10 and LTC's tax paperwork.

So I am now about to purchase a second much smaller IP down in CHCH.

Should I open a second bank account to handle the second IP's moneys and run a second Excel worksheet as well ?

Or just lump them both into the first worksheet..as they will both be owned by the LTC.

Thanks
Richard

[AndrewENZ]

Do whatever works for you. I'd personally run two spreadsheets (for individual properties) that consolidate into a single one (to give you your tax figures) and 1 bank account.

[Gladdynook]

Single bank account is far easier. And single spread sheet works for me also. Having them combined allows for you to budget a bit easier too. You can spread the mortgage payments to come out at different times during the month, and rents will vary as to when they arrive. One tip is to enter all forecast expenses and income for the upcoming three months. That way you'll know if you'll have enough funds for items like rates as they come every three months.

[Rosco]

Hi Richard,

Make sure your spreadsheet / accounts are keeping a record of your shareholder current account.

I would also recommend getting at least a review done of your records by a property accountant, to ensure you aren't claiming items that you aren't allowed to, and that you aren't missing important deductions such as chattels depreciation.

Ross

[richard56]

Hi
Thanks for your concern Ross.
My spreadsheet tracks my shareholder current account and owner's basis plus all the day to day stuff.
It worked great for the two previous years and this year...despite the IRD changing the IR10...I was able to get my tax return into the IRD
very quickly.
This resulted in another tidy little refund that turned up in about 6 weeks flat.

I understand what you are saying about independant advise and I will consider it.
Thanks
Richard

[Rosco]

Unfortunately tax law is getting more and more complex. Changes occur all the time, and it is very difficult to keep up with everything.

How can you be sure you are keeping doing it correctly?

Some of the big mistakes I have recently seen
- no chattels depreciation
- mistakes on depreciation recovery (actually from other accountants)
- Not changing shareholding in LTC (when you legally could) to put more loss to higher tax payer, or more profit to lower tax payer - Be careful changing shareholding as can result in deemed sale, which can have consequences - accountants too
- Claiming repairs when property just purchased, and they are really cost of property
- not looking at opportunities to borrow more in company that is tax deductible - accountants too
- missing deductions for expenses
- miss adding in excel. ie sum c to H, when should be a to H.
- claiming depreciation on items that are building - accountants and non accountants

Ross

[richard56]

Hi


Some of the big mistakes I have recently seen
- no chattels depreciation...Sorted....and yes I put my own valuations on the chattels I am depreciating..which I will have to justify to the IRD if needed.
- mistakes on depreciation recovery (actually from other accountants)...Nothing has been sold so nothing to recover
- Not changing shareholding in LTC (when you legally could) to put more loss to higher tax payer, or more profit to lower tax payer - Be careful changing shareholding as can result in deemed sale, which can have consequences - accountants too...Single so I,m the only tax payer
-Claiming repairs when property just purchased, and they are really cost of property.Yes I am aware of this one...being careful with my next IP purchase as it will need some repairs straight away.
- not looking at opportunities to borrow more in company that is tax deductible - accountants too..Will be looking at this as soon as I want to have the LTC pay me back some of my shareholders current account.
- missing deductions for expenses..Trying to include all that I can
- miss adding in excel. ie sum c to H, when should be a to H....I too have trouble trusting Excel too much and find myself doing the odd manuel check on my numbers
- claiming depreciation on items that are building - accountants and non accountants

I know that I will never be as good as a "professional" but I am confident enough of my records and bookkeeping to continue myself.
Thanks
Richard

[Rosco]

Another common mistake I'm seeing at the moment

- Say personal house worth $450k with $0k debt [house A] and have $100k cash
- Convert House A into rental
- Buy new personal house, worth $550k, with with $450k debt
Lots of people are then claiming interest on the $450k debt. This can't be done as the $450k was used to buy the personal house, so no tax deduction.

A restructure can fix this problem and legitimately move the $450k debt to the rental property.

Ross

[nick_auckland]

Hi Rosco,

my situation here is i bought my personal home [houseA] 2 years ago, now the MV is about 280K . The debt is about 260K when i converted into rental property.

the new personal home house B i bought late is worth $600k, with $300k debt. is it fine to claim tax deduction on 260K on houseA (rental property now)?

and does it worth to resturcture , e.g. move the rental to LTC ?

Another common mistake I'm seeing at the moment

- Say personal house worth $450k with $0k debt [house A] and have $100k cash
- Convert House A into rental
- Buy new personal house, worth $550k, with with $450k debt
Lots of people are then claiming interest on the $450k debt. This can't be done as the $450k was used to buy the personal house, so no tax deduction.

A restructure can fix this problem and legitimately move the $450k debt to the rental property.

Ross

[Rosco]

Hi Rosco,

my situation here is i bought my personal home [houseA] 2 years ago, now the MV is about 280K . The debt is about 260K when i converted into rental property.

the new personal home house B i bought late is worth $600k, with $300k debt. is it fine to claim tax deduction on 260K on houseA (rental property now)?

and does it worth to resturcture , e.g. move the rental to LTC ?

Hi Nick,

It depends on the exact facts.

With house A, what was the debt before it became a rental? Only this portion will be tax deductible. It is only the debt used to buy this house A that will be deductilbe. If you borrowed for the deposit or purchase of house B, it won't be deductible.

So if you paid down the debt while it was personal and had a house worth $280k and $0k debt. Then purchased new personal house for $600k, and borrowed $300k and $260k. Even though the $260k might be on house A, it was used to buy house B, so the interest won't be deductible. In this case a restructure would be worth looking at, and we would look at cost vs benefit initially.

On other hand, if the debt on House A was always $260k, then the $260k will be tax deductible and a restructure wouldn't be worth while, just to make the extra $20k claimable. But this would mean you had $300k cash to buy new personal house, which normally isn't the case.

Ross

[Wayne]

regarding the 2nd set of accounts - I use 1 for all properties. Money is money!

[Harvey Specter]

To be honest Richard as long as you are carefully adding up the sums and using the IRD's guides carefullly (there websites and literature are generally very good and easy for laypeople to understand) I don't see big risks in doing your own tax returns for rental properties only. It is generally pretty straightforward. As long as you are careful to depreciate assets property, that is probably the most difficult part.

[richard56]

Hi
Thats what I have found during the last two tax years.
My Income/Expenses spreadsheet and my Deprecation spreadsheet are both based on and an extension of the ones IRD give as example.
Same layout as the IRD's so that should keep me in the good books.

I have mined this forum for information for the last two years and I have kept investments as simple as I can.
Separate bank accounts for IP and personal.
Separate banks for IP mortgage and POPR
No depreciation on House and Land as I only brought in 2012
Thanks
Richard

[nick_auckland]

Thanks Rosco.

my house A mortage had one floating about 180K and one fix for the rest amount at that time, then luckly my parent happy to help about 100K for my house B deposit, so i put the 100K into the floating account during the time i looking for house B (about 6 to 9 months)

i just not sure if it worth to restructure to make it clean & easy.

Hi Nick,

It depends on the exact facts.

With house A, what was the debt before it became a rental? Only this portion will be tax deductible. It is only the debt used to buy this house A that will be deductilbe. If you borrowed for the deposit or purchase of house B, it won't be deductible.

So if you paid down the debt while it was personal and had a house worth $280k and $0k debt. Then purchased new personal house for $600k, and borrowed $300k and $260k. Even though the $260k might be on house A, it was used to buy house B, so the interest won't be deductible. In this case a restructure would be worth looking at, and we would look at cost vs benefit initially.

On other hand, if the debt on House A was always $260k, then the $260k will be tax deductible and a restructure wouldn't be worth while, just to make the extra $20k claimable. But this would mean you had $300k cash to buy new personal house, which normally isn't the case.

Ross

[nick_auckland]

that's what exactly i want to do , just feel clean & easy.

now my IP and personal are same bank, and i will need to wait another year for the re-new, hopefully i can move my IP to another bank next year

Hi
Thats what I have found during the last two tax years.
My Income/Expenses spreadsheet and my Deprecation spreadsheet are both based on and an extension of the ones IRD give as example.
Same layout as the IRD's so that should keep me in the good books.

I have mined this forum for information for the last two years and I have kept investments as simple as I can.
Separate bank accounts for IP and personal.
Separate banks for IP mortgage and POPR
No depreciation on House and Land as I only brought in 2012
Thanks
Richard