David has just delivered his first investment home. As a love of learning, he has long heard of the depreciation report, the advantage of Australia's real estate investment, also want to apply for his own love house, but the price of depreciation report on the market is quite different.
On-line see inside a variety of roads and many, and look at friends invest in the depreciation report, some dozens of pages, it is inevitable that some head.
How to interpret depreciation report at professional level? How many mistakes are there? Let's answer one by one.
Mistake one, think oneself spend how much money to buy a house, can apply how much depreciation expense deducts tax.
In fact, the total price of your purchase needs to be distributed to the land, house structure, equipment and decoration and other parts, only the cost part can be discounted, the rest is not deductible, such as the developer's profit portion.
Misconception 2, as long as with the name of house, you can apply for depreciation expenses tax credits.
The following is a detailed analysis of common items that cannot or should not be depreciated.
1. Old house
When you apply for depreciation reports, companies that deal with them often ask about the completion date of the building, (construction completion date). Why?
Behind this is a law rule in restraint. Any residential building built earlier than September 15, 1987, equal to more than 31 years ago, is no longer eligible for depreciation under structural engineering allowance.
So if you buy the old house, can you still amortize this part of the depreciation? In fact, still should seek the professional advice of the quantity surveyor, because often there may be other asset items or operational. For example, the former owner of certain decoration costs, qualified equipment or decoration, and so on.
2. Second-hand room
In a twinkling of a second, this year's budget night is coming. Do you remember the proposal and the bill passed last year? One is closely related to real estate depreciation, swapping contracts to buy second-hand residential homes after 7:30 on May 9, 2017, and new owners are not entitled to asset depreciation on the property's existing equipment.
But new owners of their own new equipment assets can continue to make depreciation tax credits.
In other words, investors' purchases of brand-new properties and second-hand homes before last year's budget night are unaffected and can still be fully depreciated in accordance with the old method.
3. Land
Land or land valuation does not take account of depreciation. Why? House itself has cost costs, and will gradually depreciate, so accounting or tax law is based on a limited amount of time to calculate the annual value of loss, which is often called depreciation.
But land is not lost, so there is no need for depreciation, even because of the scarcity of resources.
4. Building overthrow
Some real estate investors prefer to buy a "land-broken house" and then follow their own ideal model to push down and rebuild. So can the overturning cost of this part of the building be depreciated? The answer is NO..
5. Cost of planting flowers and trees
Investors in addition to real estate investment, more willing to put money into the periphery of the landscape construction and planting flowers and trees, for house to add a lot of color. But the recommendation is that trees are not as depreciable as physical buildings, often referred to as the difference between soft landscaping and hard landscaping.
6. Maintenance and updating
The nature of repair, maintenance and renewal is completely different, and the treatment of natural depreciation is also different.
For example, there is a hole in the fence that can be repaired and replaced with the same material. House's wooden platform to prevent decay and paint, this can be counted as maintenance. These are not depreciation items; they can be charged at one time.
But for example, integral kitchen cabinets to update, or change air conditioning, this is equipment updates, need to be depreciation amortized way to deal with.
7. Purchase cost
Law expenses, house inspection fees, pest inspection fees, stamp duties, etc., related to home purchase, should not be considered depreciation. All can not, these belong to the cost of buying a house.
Myth three, the cheaper the depreciation report, the more cost-effective, anyway, is the same report?
Why can some depreciation report fee be very cheap, some not? The reason is simple. One penny at a time. As real estate's investment accountant, we've seen a lot of depreciation reports, and there's a big difference in quality.
In general, the pricing of professional reports is unlikely to be very low, as surveyors visit the site and, although the costs are increased, the quality of the reports increases considerably.
On the one hand, it can reflect the actual situation of house more truthfully, help the quantity surveyor to collect the real data so as to maximize depreciation. On the other hand, it is strictly abiding by the regulations of the Inland Revenue Bureau, and the house over a certain age must be dealt with in this way.
All in all, any expenses spent on real estate are split into three parts, one-time expenses, depreciation amortization, and cost statistics.
It won't cost you money for nothing, and it won't pay for taxes many times. When especially sells house, for some investment houses, depreciation needs to be restored, depending on the circumstances of each person, professional accountants will give you customized answers.
