{"id":6208,"date":"2015-11-02T01:00:30","date_gmt":"2015-11-01T14:00:30","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=6208"},"modified":"2015-11-02T01:00:30","modified_gmt":"2015-11-01T14:00:30","slug":"depreciation-on-a-cosmetic-renovation","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/depreciation-on-a-cosmetic-renovation\/","title":{"rendered":"Depreciation on a cosmetic renovation – Brad Beer"},"content":{"rendered":"

 
\nOur question of the week comes from Rita who asks about depreciation on a cosmetic renovation and if she needs to replace her existing schedule or just add to it. In today’s show\u00a0Brad Beer<\/strong><\/a>, our tax depreciation expert from BMT Tax Depreciation,\u00a0joins us.
\n <\/p>\n

Transcript:<\/h4>\n

Kevin<\/b>:\u00a0 As I said at the start of the show, we had a question \u2013 and a good question \u2013 from Rita, who writes and asks a question about tax depreciation:
\n\u201cI had a depreciation schedule done about 10 years ago for my investment property, which is now 12 years old. I\u2019ve just done a cosmetic renovation, replacing the original carpets and blinds and adding new fencing. I\u2019m also doing other repairs and maintenance, like painting and floor sanding. Do I need to get a new depreciation report done, or do I just give my tax accountant a list of the costs and let him work out the items and add the depreciation schedule, which ones to claim as repairs?\u201d
\nThanks for that question, Rita. I imagine a few people would probably want to know the answer to this. Brad Beer, our tax depreciation expert, joins us from BMT Tax Depreciation.
\nBrad.
\nBrad<\/b>:\u00a0 Hi, Kevin.
\nKevin<\/b>:\u00a0 What would you say there to Rita?
\nBrad<\/b>:\u00a0 Look, Rita, Kevin, it is a good question, and it\u2019s a regular-type question. Now that\u2019s a very specific one about what to do in a renovation, but let\u2019s address that one and some of the other things for people who are doing slightly different renovations.
\nSimply, if you had a depreciation schedule done on the actual property that you purchased 10 years ago, the things that relate to the claims on the building and the things in there don\u2019t actually change. Now when you change things, you change what is there to claim. But the original building is still depreciating, so you\u2019re still using that original depreciation schedule, yes.
\nWhen you do a renovation, obviously, you change things. You change the cost of what is there, so you change the things that are able to be depreciated. Those things that you have done there are mostly cosmetic \u2013 a carpet, blinds. For simple things like that, you have a cost, so yes, your accountant should be able to apply the correct rate to those things and make deductions for those things going forward.
\nFor fencing, once again, a new fence is a capital improvement that will need to depreciate, and you have the cost of that fence, so the quantity surveyor doesn\u2019t need to come and tell you how much that fence costs. Your accountant should be able to apply the correct rates.
\nSome of those other things and other work that are done sometimes that are repairs and maintenance, generally, your accountant will be able to make a decision as to whether they should be added to a depreciation schedule and claimed if they\u2019re a capital improvement or actually claimed as repairs and maintenance if they\u2019re repairs and maintenance.
\nAccountants often have different ideas of what things they would like to claim. It gets a bit specific about that, and we can help with that. But normally, we work alongside the accountant. As a quantity surveyor, we\u2019re the cost guy who comes up with the costs. If you have all the costs, sometimes we don\u2019t need to get involved in that because it\u2019s generally fairly simple for your accountant to work out.
\nThere\u2019s a fair bit of work done here, but they\u2019re fairly simple items. If you do a major renovation and you rip it apart, it\u2019s good to probably see the quantity surveyor about that so that they can make sure they do split up the costs properly and identify all the correct plant and equipment items and maximize the deduction going forward. That, obviously, is very important because that\u2019s what as an investor you\u2019re after doing.
\nOne other thing I\u2019d like to add, Kevin, is making sure that when you do do renovations that you do take advantage of making sure you have claimed everything on the items that were there already, and if you haven\u2019t claimed it all and you scrap those items, make sure you claim that scrapping allowance on them.
\nKevin<\/b>:\u00a0 Yes. That\u2019s what I was going to ask you about \u2013 scrapping and whether or not any of the items that Rita mentioned there would allow her to do that, Brad.
\nBrad<\/b>:\u00a0 She\u2019s had a property there for 10 years. Some of those things, their actual effective life, may have actually finished, and she may have actually claimed all the deductions. But if there is anything left on the carpet or anything there\u2026 Now the fencing is a very interesting one because the fencing, if it\u2019s only 12 years old, you should have a scrapping allowance related to that existing fencing. It depends on whether there is any value.
\nYour original depreciation schedule should show the value that may be left on any carpets, blinds, or planned equipment items, and it\u2019s simple; your accountant can adjust that. If you\u2019ve ripped out fencing and things that are 12 years old, then you have to potentially get them to give you a bit of help to split some of those costs out. But yes, it can be done. Definitely, scrapping is something to consider whenever you do a renovation.
\nKevin<\/b>:\u00a0 Yes. Some of the points you\u2019ve raised here would indicate to me that probably Rita is better off getting another schedule done, especially after 10 or 12 years. You think it wouldn\u2019t hurt to go back and refresh it all, Brad, anyway.
\nBrad<\/b>:\u00a0 I guess the misunderstanding there is it\u2019s not necessarily a new schedule; it\u2019s an adjustment to the existing schedule.
\nKevin<\/b>:\u00a0 An update, yes.
\nBrad<\/b>:\u00a0 It\u2019s best to have whoever did that schedule in the first place, make sure you talk to them and the accountant about this thing and make sure you do get it right.
\nKevin<\/b>:\u00a0 Very good advice from Brad Beer at BMT Tax Depreciation. There\u2019s a button on our home page, too, if you want more information there.
\nBrad, thanks for your time.
\nBrad<\/b>:\u00a0 Thanks, Kevin.
\nKevin<\/b>:\u00a0 I want to congratulate Rita. Rita, you are our question of the week, and as such, you get to win a 12-month subscription to Australian Property Investor<\/i> magazine. Congratulations. We\u2019ll be in touch to get your address, and we\u2019ll get it out to you.
\nKeep those questions coming in, too. Do it through the website on the Ask Our Experts button, or send me an e-mail direct to Kevin@RealEstateTalk.com.au<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

  Our question of the week comes from Rita who asks about depreciation on a cosmetic renovation and if she needs to replace her existing schedule or just add to it. In today’s show\u00a0Brad Beer, our tax depreciation expert from BMT Tax Depreciation,\u00a0joins us.  …<\/p>\n","protected":false},"author":176692471,"featured_media":5415,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[10,25],"tags":[101],"class_list":["post-6208","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-kevin-turner-sponsored-channels","category-sponsored-channels","tag-podcast"],"yoast_head":"\nDepreciation on a cosmetic renovation - Brad Beer - Realty Talk<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/channels.realty.com.au\/realtytalk\/depreciation-on-a-cosmetic-renovation\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Depreciation on a cosmetic renovation - Brad Beer - Realty Talk\" \/>\n<meta property=\"og:description\" content=\"  Our question of the week comes from Rita who asks about depreciation on a cosmetic renovation and if she needs to replace her existing schedule or just add to it. 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