Claiming furnishing expenses

Question from Chris updated on 25th June 2013:

We have recently moved house and are setting the former property up as a fully furnished rental which are in demand in Christchurch at the moment. We left some of our existing whiteware at the old place and have since been purchasing other items to meet the expectations of being fully furnished - small appliances, kitchenware, bedding etc. Can these expenses be claimed against or are they considered to be capital items? And in either case, am I right in thinking that both existing and new assets can/must be depreciated? Any advice is welcome!

Our expert Mark Withers responded:

The items will generally be considered capital assets where they have a cost of over $500. IRD have a schedule of residential rental property chattels with various allowable depreciation rates despite the fact that buildings can no longer be depreciated. The historical items you have introduced to the rental activity can also be depreciated but a calculation of their "deemed" book value for depreciation purposes needs to be made to establish the depreciable cost base. This calculation involves identifying their cost and deemed depreciation based on the time you have owned them before they were rented.

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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