Chattel depreciation payback

Question from John updated on 11th May 2018:

I have recently sold my rental property. My question is am I required to repay the depreciation on the chattels that have been replaced due to breaking down and being disposed of? The said items have been replaced but no depreciation has been claimed on the new items. So am I required to itemize the remaining chattles?


Our expert Mark Withers responded:

When disposing of the property you should always recognise that the chattels are separate items from the land and buildings and just because there is appreciation in the latter does not mean the chattels have risen in value. The law requires them to be disposed of "at market value".

This often means their values are at or below book value and no recovery is required. If items have previously been disposed of for no value the chattels should be disposed of at a zero value and a loss on disposal of their residual book value claimed.

By rights you should have been consistent and depreciated their replacements but it is a minor matter.

Mark Withers and his team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.

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