September is when we can breathe a bit easier and reflect on tax season.

Everyone has questions in tax season about depreciation. Accountants have questions. Clients do, too. 

We have been doing Depreciation Schedules for 25 years, so by now we can answer any questions thrown at us.

Do you have a question? Get in touch using your booking link, or email the team at affiliates@depreciator.com.au

Key Points

1. 1. If you need your client’s Depreciation Schedule quickly – let us know. We can often work to your deadline.
2. 2. To determine if your client can claim their Special Levy, we talk to them about the nature of the work, and how long they’ve been renting their property out for. That’s usually enough for us to give them our opinion on how it should be treated.
3. 3. If you’ve got a client with a commercial property and an incentive deed, we can help. We look after all types of commercial property from simple warehouses to farms.
4. 4. If your client has only rented out their Airbnb property part of the year, the property will need to pass the ATO’s ‘mainly’ test. If your clients use the property in peak periods, the rent seems strangely high, or pets and kids are not allowed, it may not pass the test.

How fast can you prepare my client’s Depreciation Schedule?

That’s an easy one to answer.

Fast.

Faster than any other provider, which is especially handy at this time of year when you will have clients coming to you to get their tax return done and they will have – surprise, surprise – bought an investment property you don’t know about.

Why are we so fast? It’s partly experience – 25 years is a long time to specialise in just Depreciation Schedules and we have some very good systems. 

We also have clever people who deal with your clients. They handle the initial enquiry, answer any questions your client might have, gather the information and payment to get the job going and we are off and running.

If the property needs to be inspected, we’ll have the Schedule done in 5-10 working days, depending on the availability of the tenant. If the property doesn’t need inspecting, our normal turnaround time is 5 working days – we often do it faster than that when our clients are up against deadlines. 

And not every property needs to be inspected. Often, an accountant will ask us in their initial enquiry whether we can do a Depreciation Schedule on a particular property without inspecting it.

Often we can. If it is, say, a 1998 built project home on the outskirts of Perth and the accountant just wants to know the Capital Works deduction, we can often do that from information available online.

Perhaps it is an apartment and we have already done a dozen Depreciation Schedules on apartments in the same building. There is really no need to go back there.

We do lots of Depreciation Schedules on newly built houses. Always have done. And our ‘new build’ numbers will increase because your clients will gravitate to them after the changes announced in the May budget. You can read more on those changes here. 

If the build cost is known, it must be used. And most build contracts have sufficient detail for us to estimate the Opening Value of the Assets – Div 40 items. 

Rest assured, we will always look for the most sensible solutions for your clients.

Can my client claim depreciation on a Special Levy?

Long ago, we became the ‘go-to’ people for questions about Special Levies.

Most clients think they should be able to claim them immediately as expenses because the work funded by the Special Levy is often repair work in nature.

Most accountants default to claiming them as improvements i.e. 2.5% per year.

We are contacted by clients thinking their accountants are being to conservative, and accountants believing their clients are thinking too aggressively.

So we wade in.

We talk to the client about the nature of the work and how long they have been renting out their property for. Those two things are usually enough for us to be able to give an opinion on how a Special Levy should best be treated.

Then we send the client an email and tell them to discuss our opinion with their accountant.

We take a similar approach to tricky repair vs improvement matters. These ones can be trickier because often they have more grey areas. We’ve written about repairs vs improvements here. 

My client has a commercial property with an Incentive Deed – can you help?

Sure can.

Shops, offices, warehouses, restaurants, factories, farms. You name it, we’ve prepared a Depreciation Schedule for it.

And we do them properly. Some of the providers who tackle commercial properties make mistakes.

It takes more experience to do commercial work properly. You need to be on top of GST and the Instant Asset Write-Off eligibility – the threshold for that has moved around a lot over the years.

You also need to know which properties qualify for the 4% Capital Works deduction vs 2.5%.

 And you need to understand the complication when two entities are involved – a landlord and tenant. Sometimes the client controls both entities. They might, say, on a building in their SMSF but could have done a fit out through their business. We do two Depreciation Schedules in those cases.

Then there are the occasions when a client has done a fit out to a property they don’t own and a landlord has given them an incentive. We do at least one of these every week.

The most recent was a $1.63m fit out with a $500K landlord contribution. Rarely, in 25 years, has there ever been guidance on what works could be attributed to the landlord. So we need to make a determination. 

Capital Works we logically attribute to the landlord as they will still likely be there long after the tenant leaves. If we need to make up the balance of the landlord contribution with Div 40 items, we will often include recessed lighting, electronic door openers perhaps.

To the tenant, we logically attribute items with shorter Effective Lives, like floor coverings, window furnishings, appliances, air con. It’s a judgement call, and that takes experience.

You can read more about Commercial properties on our website here.

Can my client claim depreciation on their Airbnb if it’s only rented part of the year?

The changes announced earlier this year were forgotten in the excitement around the May Budget, but they were significant for your clients who own Airbnbs.

And the ATO have said they are going to looking closely at these this year. You can read more on this here. 

In a nutshell, people will only be able to claim costs like interest payments, rates, insurance, depreciation etc if the property is ‘mainly’ available to let. The problem being that ‘mainly’ is up to interpretation. 

If the property is not ‘mainly’ available to rent, clients will still need to declare the income, but they will only be able to deduct expenses like cleaning and advertising that relate to the rental period. Gone will be the possibility of claiming deduction for interest, council rates, depreciation etc.

And when push comes to shove, the onus will be on the client to prove the property was ‘mainly’ available to let and any private usage was incidental. If the client uses the property in peak holiday periods, they will not pass the ‘mainly’ test. 

Similarly, if the rent asked seems inordinately high, or pets and kids are not allowed, or internet is not provided. You get the idea.

And these changes come on top of local councils limiting the number of days a property can be rented short term.

It’s no wonder people have questions.

Enquire now for a property-specific assessment

Has this article reminded you about a client’s investment property? Residential properties, commercial properties, even farms, we do them all.

If you want us to talk to a client about a Depreciation Schedule, make a no-obligation enquiry and rely on our 20-plus years of experience in estimating depreciation returns.