Can I revalue my asset to offset tax?
Question from Josh updated on 30th September 2011:
Our expert Mark Withers responded:
Booking an unrealised revaluation or devaluation of an investment property does not give rise to a tax deduction. In an accounting sense it only impacts the equity section of the balance sheet. It's a pity you haven't been depreciating. Depreciating the building would have given you a hedge against this very outcome where the building has indeed depreciated.
Even if you realised the loss by selling the property a loss on disposal of the land and buildings is not deductible unless the company is associated with a builder, developer or subdivider or you can prove that the property was purchased by the company with an intention to resaleie if teh property was considered trading stock of a development activity.
Remember to make your LTC election before the 30 September deadline if you decide to go down that route but think carefully about the rental profit or loss equation rather than the movements in the value of the property when making your elective decision.
Mark Withers and his team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.