View Here
| by Trevor Prendergast | |||||||||
|
|||||||||
| Residential property investors are surprised at the extensive list of components accepted by the IRD as chattels. And equally surprised at depreciation rates such as 33% for carpet, 22% for heated towel rails, smoke alarms, appliances and varying rates between 7.5% and 9.5% for non load bearing walls, plumbing fixtures, electrical reticulation and decks and fences.
Example 1 If an accountant does not use a chattels valuation and adopts the common 4% overall depreciation on a $180,000 house (excluding land), this gives the rental investor $7,200 as a claimable amount. At 39c in the dollar tax rate, this equates to a tax adjustment of $2,808. Example 2 However, a chattels valuation can increase the claimable amount for a rental investor. A recent chattels valuation of a $180,000 house (excluding land) totalled $63,000. The house at $180,000 less chattels leaves a sum of $117,000 which would depreciate at the standard rate of 4%. In our chattels valuation of $63,000, we adopted differing rates of depreciation on various components, the total depreciation totalled $7,718. Using the same 39c tax rate, the adjustment is as follows: |
|||||||||
|
|||||||||
|
|||||||||
| Note: Advice on tax principles should be sought from a hartered accountant. | |||||||||
0800 PRENDOS+64 0800 773 636
Auckland | Tauranga | Wellington | Christchurch
CHATTELS VALUATIONS CAN INCREASE NETT RETURNS
