Did not claim depreciation on property

[Beano]

I have a friend who's accountant has not claimed depreciation on his commercial and residential properties
It has now been 4 years so 3 years have been filed
Question
1 can you now start depreciation?
2 can you backdate ?
3 can amend earlier returns ?
Not a large portfolio $3m but still worth claiming I believe

[Anthonyacat]

1. Nope, sorry! By not depreciating in the first return, those assets have been elected non-depreciating for their lifetime with the entity.
2. Nope, sorry!
3. Nope, unless there's a 'genuine error'. This is unlikely to apply simply due to bad advice or bad decision not to depreciate.

There's a view that one could restructure, selling everything to a new entity which might then be able to elect to depreciate from the date of purchase, but it's a little on the shady side. If the restructure were completed with a primary purpose of reducing tax, that's possibly able to be deemed as avoidance by the IRD.

[King13]

How much would the depreciation be considering land is not depreciated and building/chattels are depreciated at about 2% (?).

[Anthonyacat]

How much would the depreciation be considering land is not depreciated and building/chattels are depreciated at about 2% (?).

Most chattel are depreciated at 5-30%, with some as high as 67%. It can be big numbers.

And given its Beano asking, this is probably commercial, so a vast swathe of items not available for residential depreciation are possible.

[mrsaneperson]

I have a friend who's accountant has not claimed depreciation on his commercial and residential properties
It has now been 4 years so 3 years have been filed
Question
1 can you now start depreciation?
2 can you backdate ?
3 can amend earlier returns ?
Not a large portfolio $3m but still worth claiming I believe

I had the same broken record deal with my previous accountant even when i provided him with chattels valuation properties he was quite in the dark about it and reluctant to understand that chattels depreciation is still able to be claimed on many items as long as they are identified separately and pass the IRD 3 step test. As Anthony above stated backdating is probably not an option.

Tony Thorne is excellent with regard to understanding the chattels depreciation and all things property related , i highly recommend him, even though he's based in Auckland , this is no barrier for anyone outside that area with digital communications, his contact details are :


THORNE ACCOUNTING

Ph (09) 571 0491

Fax (09) 929 3019

642 Great South Road, Ellerslie, Auckland 1051

PO Box 11264, Ellerslie, Auckland 1542

Email [email protected]

Web www.thorneaccounting.co.nz

[Rosco]

I have a friend who's accountant has not claimed depreciation on his commercial and residential properties
It has now been 4 years so 3 years have been filed
Question
1 can you now start depreciation?
2 can you backdate ?
3 can amend earlier returns ?
Not a large portfolio $3m but still worth claiming I believe

Hi Beano,

Do the properties have many chattels? In some cases if the chattels are worth very small amounts, then it might not be worth getting a Valuit chattels valuation done.

If this is not the case, I would get your friend to ask their accountant, "why wasn't a chattels valuation and depreciation suggested?" - and see what comes back.

Ross

[Beano]

Hi Beano,

Do the properties have many chattels? In some cases if the chattels are worth very small amounts, then it might not be worth getting a Valuit chattels valuation done.

If this is not the case, I would get your friend to ask their accountant, "why wasn't a chattels valuation and depreciation suggested?" - and see what comes back.

Ross

I am not sure but on our catchup later this week I am going to suggest he calls you directly as his current accountant is clearly not switched on

[mrsaneperson]

Hi Beano,

Do the properties have many chattels? In some cases if the chattels are worth very small amounts, then it might not be worth getting a Valuit chattels valuation done.

If this is not the case, I would get your friend to ask their accountant, "why wasn't a chattels valuation and depreciation suggested?" - and see what comes back.

Ross

Few properties would not be worth doing a Valuit chattels report on. The report includes fencing, hot water cylinder, oven , certain types of detachable decking and a host of other things.

[Rosco]

Few properties would not be worth doing a Valuit chattels report on. The report includes fencing, hot water cylinder, oven , certain types of detachable decking and a host of other things.

For very cheap ones it isn't always worth it. ie a $100k property probably wouldn't be worth it (don't ask me where a $100k property is in nz.

Or if you were going to rip out all the chattels and add new ones straight away

Or if you were on a very low income(so low tax rate), or had huge losses to use up!

There can be reasons why a chattels valuation is not done!

Ross