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By splitting the purchase price of
your investment property into the various depreciation categories
set by IRD you will increase your depreciation claim.
Many investors claim nominal depreciation
based on the value of chattels assessed by a Registered Land
& Buildings Valuer. This value is assessed for Finance
purposes, and will not maximise the depreciation claimable
by Property Investors. There are three main asset classes
that should be included in an apportionment report for depreciation.
These assets classes are:
LAND
Non depreciable
BUILDING STRUCTURE
Depreciable at 4%DV prior to 19 May 2005 or 3% DV after
CHATTELS & BUILDING FITOUT
Depreciable at:
7.5% - 50% for older dwellings or
9% - 60% for new dwellings
Chattels is the first category for
depreciation of Residential Rental Properties. This includes
assets such as:
Carpets
Blinds
Stove
Light fittings
Building Fit-out is the second category
for depreciation of Residential Rental Properties. This includes
assets such as:
Electrical Reticulation
Plumbing Fixtures
Fences
Partitions (non-load bearing)
These assets are a small sample of
the various assets that can be separated from the building
structure for depreciation purposes. By applying the correct
depreciation rates as specified by IRD we can maximise your
depreciation clam and therefore your cash flow.
DO IT RIGHT
IRD does regularly carry out investigations
into rental properties, this includes depreciation claimed.
It is essential that You, Your Accountant or Valuer, are able
to fully explain the methodology used or why certain assets
have been included, and the values placed on each asset. Penalties
will be imposed if the information in your return cannot be
substantiated.
IMPORTANT NOTICE
The
depreciation rates shown within our reports and on this website
are the published IRD rates. There is currently a project
underway by IRD to determine the correct interpretation of
the law in relation to how some of these rates should be applied.
As these are published rates and have been largely accepted
by IRD since the introduction of the new depreciation schedule
in 1993 we are continuing to include them in our reports.
There is however debate within the Property sector and IRD
over how some of these rates should be applied.
Valuit
Asset Appraisals Ltd can substantiate the opening book values
that we provide but must advise that rules regarding the use
of some depreciation rates may change.
Valuit
is working closely with other property professionals in consultation
with IRD over this matter and any future developments will
be notified in the "Valu in Review" newsletter and
on this website.
We strongly
advise that you take direction on this matter from a specialist
property accountant prior to submitting your tax return.
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