Chattels Valuation and Depreciation
For property investors, it is necessary to get a chattels valuation. This is important so that the value of the chattels can be separated from the value of the land and the buildings. If you fail to have a chattels valuation, you will not be able to claim. That’s a loss opportunity to improve your cash flow. As someone who owns a property, the concept of chattels valuation and depreciation must be taken seriously, and that is where an experienced property accountant can assist.
What are Considered Depreciable Chattels?
Fortunately, Inland Revenue Department (IRD) has provided a list of depreciable chattels where you can get claims. However, we still encourage you to look for a professional to conduct chattels valuation. With an expert, you can get a detailed report which can be shared with the IRD. Below is a partial list of depreciating chattels according to them.
- Air conditioners
- Air ventilation systems
- Heap pumps
- Lawn mowers
- Light shades
- Microwave Ovens
- Satellite receiving dishes
- Vacuum cleaners
- Washing machines
- Waste disposal units
- Water heaters
Also, the IRD provided a 3-step test to identify if a chattel is considered as an integral part of the building or a depreciable chattel. Below are the steps to follow:
Step 1 for Chattels Valuation and Depreciation: Is the item attached to the building?
If the item is completely unattached, then it isn’t part of the building. This includes appliances which can be plugged or wired into an outlet. These items can be categorized as depreciable chattels. For other things that are attached, then we proceed to step 2.
Step 2 for Chattels Valuation and Depreciation: Is the item an integral part of the property of building? Will the property be considered incomplete without it?
If you answered yes, then it will form part of the building. If not, then proceed to the third step.
Step 3 for Chattels Valuation and Depreciation: Is the item built-in to the building in such a way that it is part of the “fabric” of the building?
When answering the last question, you have to consider the degree of attachment. Is it hard to remove and will cause damages? If yes, then it will form part of the building.
Get a Professional to Identify Chattels Valuation and Depreciation – Is It Worth It?
You see, depreciation cannot be claimed if you have not completed a chattels valuation.
While you can do your own valuation, you might miss a thing or two being a non -expert. Having said that, we suggest that you get professional services instead. Know that the benefits of getting a professional to do chattels valuation can outweigh its cost. Thus, do not think of it as a useless expense for your rental property.
If you must know, it is mandatory to provide a chattels valuation with the list of items including their individual values. Do you really want to take on that task instead of focusing on how you can grow your business?
Where to Get Help for Chattels Valuation and Depreciation?
Several accounting firms provide services specifically for chattels valuation. We highly encourage that you work with them simply because they know the local tax laws and regulations. In addition, they can find ways on how you can maximize your deductions and reduce your taxes.
Also, hiring an accounting firm such as Citywide Accountants in Auckland makes everything easier. You will be guided every step of the way. Another benefit of hiring one is that you can ask as many questions as you like in order to understand chattels valuation and depreciation. As a property investor, it is important that you know all areas of your business.
How to Find the Perfect Accounting Firm for Chattels Valuation and Depreciation
As always, the best way to shortlist firms or companies is to ask for referrals. However, do not solely rely on such. It is still recommended that you do the research on your own. See if an accounting firm has worked on similar cases or needs. You can also ask for their clientele. This can help you gauge if they can help you.
Chattels valuation and depreciation is a concept which a property investor like you should embrace and take advantage of. Let Citywide Accountants help you wherever you are in New Zealand. We are property investors ourselves, and with that perspective have the on hands experience to help you with property investment accounting to maximise your return on investment.