Scrap that!

Scrap that!

by Sarah Latham 0 comments

We've most likely all heard of a tax depreciation report, but have you ever heard of a scrapping report?

I recently had a chat to the team at BMT Tax Depreciation and learned some key factors I thought might be of interest to you.

If your clients are considering a renovation, it is essential that they consult with a quantity surveyor such as BMT. They can assess if there is any residual value in the items they are planning to remove.

'Scrapping' is a situation where you are removing an asset before its effective life has ended. If there is a residual value in the assest, in many cases your client can claim this remaining value instantly, rather than writing it off over many years as they normally would.

An example of this, according to BMT, would be as follows: carpet has a 10-year effective life, meaning that if using the prime cost method of depreciation, your client would claim the carpet at a rate of 10 per cent for 10 years. Hypothetically, let's say that the carpet has a value of $2,000. After one year, your client can claim 10 per cent of the value as a deduction ($200), so the residual value is $1,800. If for some reason, they remove the carpet after the first year, they can claim the residual value (i.e. $1800) in the year it is removed.

In this sense, not claiming scrapping could be the equivalent of throwing thousands of dollars in the skip bin.

I am told that:

  • The property must be a rental property/available for income to claim scrapping/depreciation.
  • Consultation with both a quantity surveyor and accountant is recommended when considering a renovation and/or scrapping assets.
  • It is imperative that an inspection is carried out on the property prior to the assets being removed.

Something to consider if/when your clients are next looking to tackle a property upgrade.

Scrap that!
lawyersweekly logo

Sarah has over 20 years’ experience in property management on Sydney's Lower North Shore. She previously managed a large property management department for eight and half years until mid last year when she made the decision to team up with an ex-colleague of hers, Jaala Cusack, and open her own boutique property management business called Latham Cusack Property Services. Based in Cremorne, they manage properties along the Lower North Shore. Their main focus is to offer a more personalised and proactive style of property management – one dedicated to listening to and meeting their clients’ individual needs.

More articles from this author:
promoted content
Recommended by Spike Native Network
Listen to other installment of the Real Estate Business Podcast
reb top 100 agents 2017

With a combined sales volume of over $14 billion in 2017, the Top 100 Agents ranking represents the very best sales agents in Australia. Find out what sets them apart and learn their secrets to success.

featured podcast

featured podcast
Taking a bite-sized chunk out of the market: how this agent found her niche

In this episode of Secrets of the Top 100 Agents, BresicWhitney agent Catherine Dixon reveals how she found her niche and became an expert i...

View all podcasts

Does blogging help in growing your personal brand?

Yes
No
Depends on who is writing it
Depends on who is reading it
Do you have an industry update?