Deductible Expense or Asset to be depreciated?

[richard56]

Hi
Spent $1400 on a Shower/Toilet and vanity combo to replace worn out/damaged bathroom in my rental.
So is it a Deductible Expense or Asset to be depreciated?
I assume it cannot be an asset/chattel as it is "connected" to the building.
This combo has not "improved" the bathroom just reinstated it to a normal standard.
Thanks
Richard

[Rosco]

How long have you owned the rental for?

If owned for over a year and expenditure not linked to purchase of the property, then will be repair.

As you put, the asset you are looking at is the building, and the bathroom work is merely a repair to this.

Ross

[artemis]

If getting a tradie in for the job, helps to ask for invoice to be itemised to say something like - removed and disposed of xxx which was broken / in poor condition / not useable .... just for the record.

[Eugene]

Is one year always enough? And what say the repair was around $6000 for a leaking internal deck? - new membrane, replace rot, etc - all repairs but mounts up

[Daisy]

Not an accountant, but I believe that if the replacement just takes the condition roughly back up to what it was when you bought the place then it is claimable as an expense. Of course if you haven't had the property long and/or are doing improvements then it probably won't be.

[richard56]

Hi
Thanks for that info.
I have another question.
Is it correct that if an asset/chattel is purchased,lets say a set of curtains,and the cost is less than $500 then it can be claimed straight away as an expense and does not have to be deprecated?
Thanks
Richard

[DaveW]

I'm not an accountant either, but if you had a chattel valuation done then you can see which items can being depreciated and you can update their respective book value if replaced. Floor coverings is one I think.

[epsomtax]

Hi
Thanks for that info.
I have another question.
Is it correct that if an asset/chattel is purchased,lets say a set of curtains,and the cost is less than $500 then it can be claimed straight away as an expense and does not have to be deprecated?
Thanks
Richard

Hi Richard56

Anything which meets the IRD definition of a chattel and costs $500 ex GST or less can be expensed. If over this amount, it is then capitalised and depreciated.

[Anthonyacat]

Anything which meets the IRD definition of a chattel and costs $500 ex GST or less can be expensed. If over this amount, it is then capitalised and depreciated.

Just to clarify the above, the $500 is GST Inclusive if the activity is not in the GST net (such as residential rental). The $500 is GST Exclusive if the activity is in the GST net (such as commercial rental, or most other businesses).

Also doesn't so much need to meet the definition of a 'chattel', so much as an 'asset'. For example, if building a new fence for $500 it can be expensed, but for $500.01 it should technically be capitalised and depreciated (10% DV, or 7% SL)

However; important to note the other restrictions, per the IRD: (I'm not allowed to post links, but google "$500 depreciation IRD", you'll get the page.

Low-value assets, that is, assets that cost $500 or less, are deductible in the year they are acquired or created provided:

• they are not purchased from the same supplier at the same time as other assets to which the same depreciation rate applies (unless the entire purchase costs $500 or less)
• the assets will not become part of an asset that is depreciable, for example, the cost of materials to build a wall in a factory
• they were purchased on or after 19 May 2005 (the threshold before 19 May 2005 was $200.00)

Hope that helps!

[spaceman]

^ Dang!!!!!!.....good first post

Cheers
Spaceman

[Wayne]

it is a good 1st post and I learnt something - I thought it was <$500 but $500 or less is good. Never actually looked it up but was wondering about the $500 dishwasher I purchased - should have beat them down 1c, now I'm all good.

[epsomtax]

Just to clarify the above, the $500 is GST Inclusive if the activity is not in the GST net (such as residential rental). The $500 is GST Exclusive if the activity is in the GST net (such as commercial rental, or most other businesses).

Also doesn't so much need to meet the definition of a 'chattel', so much as an 'asset'. For example, if building a new fence for $500 it can be expensed, but for $500.01 it should technically be capitalised and depreciated (10% DV, or 7% SL)

However; important to note the other restrictions, per the IRD: (I'm not allowed to post links, but google "$500 depreciation IRD", you'll get the page.

Low-value assets, that is, assets that cost $500 or less, are deductible in the year they are acquired or created provided:

• they are not purchased from the same supplier at the same time as other assets to which the same depreciation rate applies (unless the entire purchase costs $500 or less)
• the assets will not become part of an asset that is depreciable, for example, the cost of materials to build a wall in a factory
• they were purchased on or after 19 May 2005 (the threshold before 19 May 2005 was $200.00)

Hope that helps!

Thanks for all that extra info... sorry I was in a rush so my reply wasn't the clearest. One thing for the OP to note is to make sure that any expense which is either claimed or depreciated does fall into the category of being a claimable expense, and not a non-deductible improvement to the value of the property...