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Many of the property investors may be missing out on considerable
financial benefits. This is because they are not aware of their
option to obtain professional assistance to identify and quantify
the assets within their properties to maximise the tax
depreciation, which would potentially improve their cash flow and
portfolio yield.
Maximisation of tax
depreciation can be achieved by undertaking a one-off purchase cost
allocation, whereby building fit out assets are separated from the
building structure in accordance with Inland Revenue's asset
categories and their depreciation rates. The tax depreciation rates for some of the
categories are shown on the following table:
|
Category |
Diminishing Value Depreciation Rate (%) |
Straight Line Depreciation Rate (%) |
| |
|
|
|
Carpets |
40.0 |
30.0 |
|
Vinyl flooring |
20.0 |
13.5 |
|
Light fittings |
20.0 |
13.5 |
|
Electrical reticulation |
8.0 |
6.0 |
|
Sanitary fittings |
8.0 |
6.0 |
|
Plumbing reticulation |
8.0 |
6.0 |
|
Suspended ceilings |
10.0 |
7.0 |
|
Non-load bearing partitioning |
10.0 |
7.0 |
|
Lifts |
10.0 |
7.0 |
|
Heating and ventilation systems |
10.0 |
7.0 |
(Rates shown apply to non-residential buildings purchased
from 1 April 2005)
Building structures should be depreciated at 4% DV (or 3% SL) when
purchased prior to 19 May 2005, and at 3% DV (or 2% SL) when
purchased on or later than 19 May 2005.
These categories were
created to take cognisance of the fact that many of the assets
within building structures have a much shorter economic life than
the building itself and will therefore attract higher depreciation
rates.
Plant & Machinery
Valuers Ltd. are specialists is this area and are able to assist
clients with the creation of fixed asset registers in which
building fitout assets, are shown in detail on a location by
location basis separately from the building structure and then
apportioned over the purchase cost.
Depending of the type
of building this work can be undertaken for new, old and
refurbished buildings of all types, such as office blocks,
factories, warehouses, shopping centres, apartment blocks, hotels,
motels and residential properties specifically purchased as an
investment property. The best time to undertake a purchase cost
allocation is shortly after the transaction has taken place, so
that non-deductible costs associated with the purchase of the
property can be capitalised.
We will work in
conjunction with your accountants, and research applicable lease
agreements to obtain the most accurate and beneficial results. We
supply fixed asset registers both as hardcopy and in electronic
form, so that minimum input by the client or client's accountant
is required.
It is also possible
to undertake a purchase cost allocation retrospectively. In such a
case we will take into account any depreciation claimed.
Investors who are selling an investment property may wish to undertake a sales price
allocation. This is the reverse of the process described above and
it would be undertaken for the vendor of the property. By
undertaking a sales price allocation we may assist Vendors to
minimise the tax payable on Depreciation Recovered.
We invite you to call, fax or email if you require further clarification.
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