It's All In The Timing - When To Organise A Depreciation Schedule
Once people have been rebirthed into the glorious world of depreciation boosted property investing, their next question is; ‘When should I organise the schedule?’
If I can cement one thing into your brain, let that be this answer:
What I’m getting at here is that people can get seriously caught out by putting it off, and then missing out on some claims. You can normally only back claim two financial years, and you’ll generally incur a fee to amend your prior returns. So, really the sooner the better.
Getting a little more specific, people ask these two questions about timing;
- Should I wait until after settlement?
- Should I wait until after I finish (insert works here)?
Starting with question one, settlement will almost certainly be the start date for the report, so we cannot complete it until this date is at least set in concrete. However, it need not have occurred yet. The one caveat is that the property must not change between our inspection and settlement, but this is typically a period where no work is done anyway. Putting that point aside, the only issue left, is access.
A lot of the time we’re able to organise access to inspect a property prior to settlement, so there’s no need to hold off getting it done. In fact, inspecting pre-settlement normally means the property will be vacant, or at least an inspector won’t be upsetting your tenants by showing up a few days into their shiny new lease. Note: we do try not to recruit upsetting characters (sadly, some slip through into senior management), but even the most charming and swift quantity surveyors can sometimes be an unwelcome guest in a tenant’s new home.
You’ll also find that sales agents can be quite obliging if they know it’s ensuring a smooth transition to settlement with a happy buyer, so they can be a great resource for early access. So, there’s no need to hold off calling your QS for a schedule and if we cannot get access until after settlement, it will likely be right afterwards, which means everything is squared away nice and early.
On to questions two, should you wait until certain works are done?
In the old days, certainly, the opposite was the case. If there were any items that could have been scrapped, we’d want to see them before any renovation in order to estimate their value. For the subsequent works? Generally, you’ll know what’s being done, the date it’s being done and the cost. So, if you’re adding blinds to the property, if you have a receipt, we won’t need to physically see them in place. We would rely on your documentation to say they went in today at a cost of $3,000 for example.
However, if there are major works being done that will be a mix of building structure additions and plant and equipment additions, chances are you won’t have a breakdown of the costs, and we will need to inspect the works in order to estimate the breakdown of values.
In conclusion, there’s not often an argument for holding off obtaining a depreciation schedule, quite the opposite. However, a quick call to your friendly neighbourhood QS will always point you in the right direction.