IP - Can Furniture/Appliances be claimed back? (complicated)

Discussion in 'Accounting & Tax' started by Sk3tChY, 17th Jun, 2008.

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  1. Sk3tChY

    Sk3tChY Well-Known Member

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    Well as some of you may know, I just recently bought my first property..

    And so anyway, in order to receive all the first home buyer benefits as most of you probably already know you need to live in the place for 6 months..

    Anywho, after this 6 months, I'll more then likely be renting the property out..

    Basically though, for the initial 6 months while I'm living there i'm going to buy some furniture and appliances and what not, to make the place liveable..

    Now, I believe that if I were to buy these goods after the initial 6 months and put them in the place as an IP I would be able to claim them all back, is this correct?

    My quesiton basically is, if I rent the apartment out furnished after the 6 months, even though I bought the goods whilst I was living there, would I still be able to claim them back?

    Likewise with any renovations..?

    Thx.. :)

    Edit: I'm a noob.. But vaguely remember something about only being able to claim depriciation on some things.. I think items over a certain price or something, im assuming this may be the case for the furniture/appliances..?
     
    Sk3tChY, 17th Jun, 2008
    #1
  2. Simon Hampel

    Simon Hampel Founder Staff Member

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    Most items you buy for an investment property will need to be depreciated (ie claimed over a period of time - not all in the year they were purchased) unless they are capital improvements - in which case you can claim a capital works deduction and/or the costs are added to the cost base of the property.

    Either way - for depreciating furnishings or improvements while you lived in the place, you can still claim some of the depreciation after it becomes an IP - in the first year you apportion the depreciation based on the length of time it was available for rent that year.

    Either keep all receipts or get a depreciation schedule done once it becomes an IP.

    The ATO publishes guidelines on the effective life of various items which can be used to determine the rate of depreciation used.

    Remember that furnishing an apartment is not necessarily going to give you better returns after you take the extra expenses into account - it depends on your target market and location. Most tenants have their own furniture, so you are limiting your target market with a furnished apartment to a smaller subset of potential renters.

    I suggest you read the ATO publication on Rental Properties: http://www.ato.gov.au/content/downloads/NAT1729_07.pdf
     
    Simon Hampel, 17th Jun, 2008
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  3. Sk3tChY

    Sk3tChY Well-Known Member

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    Sydney, NSW
    Cheers Sim..

    Yeah I understand all the possible implications renting the place out with furnishings can cause but in this case I'll be renting the place out to a friend privately, so I wont really be looking for tennants..

    1. So basically, I'll only be able to claim depriciation for the length of time that the place becomes an IP..? So I pretty much won't be able to claim depriciation for anything for the first 6 months?

    I'll read over the link when I get the chance to look into the finer details, but put simply would that be correct?

    2. What actually makes the place an official IP so that you can start claiming things back? Do you need to have tennants in it at one stage, or just be living in another place?
     
    Sk3tChY, 17th Jun, 2008
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  4. Simon Hampel

    Simon Hampel Founder Staff Member

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    Correct.

    What will really happen is that you'll work out the depreciation for the year and then claim X/365 of that amount (where X = number of days in the year that the place was available for rent).

    Example:

    You move in on 1st July 2008 and then move out on 5th January 2009 and make the property available for rent (with 177 days remaining in the financial year), then you would be able to claim 177/365 (approx 48.5%) of the total depreciation calculated for the financial year.

    It has to be available for rent - meaning that you aren't living there, and it is in a condition ready for a tenant to move in and live there. If it takes you a couple of weeks to find a tenant, that's not a problem, you can still claim the expenses during that time - just so long as you are actually trying to find a tenant.
     
    Simon Hampel, 18th Jun, 2008
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  5. Sk3tChY

    Sk3tChY Well-Known Member

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    Thx Sim.. Very helpful as always.. :)
     
    Sk3tChY, 19th Jun, 2008
    #5