Do I need a valuation for depreciation purposes?

Michael Taylor asks:
(updated on Friday, September 12th 2008)

I have recently purchased a residential property in conjunction with a business partner - we want to claim depreciation on the building. For that we need to know the value of the building, presumably at the time of purchase. Do we have to get a valuation or can we somehow use the rateable value as our starting point and save the cost of a valuer?

Our Experts Answer:

Depreciation is always based on what you actually paid for the building, not the valuation at the time of purchase. However, if you want to make your depreciation claim bigger, then you need to get a chattel valuation. A chattel valuation is a breakdown of the various assets contained within the property, such as carpet and blinds. By having the breakdown, you can then claim the depreciation at the rate applicable to that asset. For example, the building depreciation rate is 3% but carpet is 33%. The chattel valuation must be done by an independent third party. If you are happy with just the building depreciation, then you can use the rateable valuation (or a registered valuation) to apportion your purchase price between the land and buildings.

Kenina Court is a director of Acorn Solutions Limited, an accounting firm dedicated to working with clients to help them create wealth.  She is an avid property investor, entrepreneur and seminar presenter on asset protection and wealth strategies.

 


 

 

Most Read

AIA - Go Home Loans 4.00
Unity First Home Buyer special 4.15
SBS FirstHome Combo 4.29
ICBC 4.49
Kainga Ora 4.59
SBS Bank Special 4.69
Unity Special 4.80
China Construction Bank 4.85
Co-operative Bank - First Home Special 4.89
Co-operative Bank - Owner Occ 4.99
ASB Bank 4.99
China Construction Bank 4.95
Kainga Ora 4.95
ICBC 4.99
SBS Bank Special 5.29
Unity Special 5.29
Westpac Special 5.29
Co-operative Bank - First Home Special 5.29
ANZ Special 5.35
ASB Bank 5.35
BNZ - Std 5.35
AIA - Go Home Loans 5.35
SBS Bank Special 5.49
ICBC 5.65
Kainga Ora 5.69
ASB Bank 5.75
BNZ - Std 5.75
AIA - Go Home Loans 5.75
Westpac Special 5.75
Kiwibank Special 5.89
Co-operative Bank - First Home Special 5.89
TSB Special 5.99
China Construction Bank 5.99
SBS FirstHome Combo 3.29
AIA - Back My Build 3.34
SBS Construction lending for FHB 3.79
CFML 321 Loans 4.20
ICBC 5.39
Co-operative Bank - Owner Occ 5.69
Co-operative Bank - Standard 5.69
Kainga Ora 5.79
Pepper Money Prime 5.99
Unity Standard 6.04
Unity Special 6.04