Appliance replacement - deduction or depreciation ?

[bennido]

Hi all,

I have an IP where the central heating/cooling unit has broken down.

I had a couple of tradesman in and they both came back with the advice to replace the whole thing. Apparently, the brand "Airwell" has closed down sometime ago and getting new parts in almost impossible and will take a few months !

So I've decided to replace it with a new system. Same functions - reverse cycle heating and cooling - but just a brand new unit with a different brand.

Is this considered a repair - i.e. immediate deduction next tax year ?
Or is this considered a renovation - i.e. depreciation over effective life ?

The new unit will cost about $9000 so its a lot of money [ relative to me ]. Thanks !

 

[LynnH]

It's a replacement - not a repair - so it is depreciated as per ATO schedules.

Cheers
LynnH

 

[bennido]

Ouch ! I was afraid of that ..

Thanks for the quick reply !

 

[depreciator]

With a $9,000 cost, I'd be going a bit deeper into this because there is a grey area you could question.

Central heating consists of the motor/fan, and the ducting.

Now strictly speaking, the ATO see these as two seperate things i.e. the ducting is part of the building, and the motor is an Asset.

So as Lynn said, you are replacing the entire Asset bit.

But I'm guessing you're not replacing all the ducting.

Get a Private Ruling. It costs nothing. You do it on-line. And it takes about 6 weeks (maybe a bit longer at this time of year).

You would argue that you're not replacing the whole central heating system, just part of it. I've found sometimes that the ATO don't always know their own rules as well as people on the outside do.

There was a ruling some time ago I recall where someone was able to claim the cost of replacing a vanity unit in a bathoom as a repair because the original plumbing stayed in place. It's not an identical scenario, but you can see what I mean about the grey areas.

Worth a try, anyway. All that can happen is they say, 'No. But nice try.'

(As an aside, if the ducting is staying in place, $9,000 sounds alot.)

Scott

 

[LynnH]

An interesting point, Scott!

If you go for the PBR as Scott suggests, bennido, could you please keep us posted re the outcome? I am sure that there would be many who are interested in what eventuates. Thanks!

As a rather cheeky aside, perhaps if the PBR is favourable, I might be able to wriggle a claim for the replacment of a stove ... arguing that the gas and electricity connections were part of the building and weren't replaced. Bit dubious, though - the replacement stove was a 900m wide, 6-burner $3000-odd stainless steel job, but what it replaced was a 1970s very basic model.

Cheers
Lynn

 

[bennido]

Thanks for the reply, Scott !

I will certainly give it a try. The "repair" has not started yet so this is for the FY09/10 tax return anyway, so 6 weeks is fine. Will post the result here.

Yes, the ducting will stay in place. I got 2 quotes from different tradies and both came in about $9000 (for a Daikin zonal reverse cycle heating/refridgerated cooling), so I just assumed it was reasonable. What should I be looking at for something like this ?

 

[buzzlightyear]

Thanks for the reply, Scott !

I will certainly give it a try. The "repair" has not started yet so this is for the FY09/10 tax return anyway, so 6 weeks is fine. Will post the result here.

Yes, the ducting will stay in place. I got 2 quotes from different tradies and both came in about $9000 (for a Daikin zonal reverse cycle heating/refridgerated cooling), so I just assumed it was reasonable. What should I be looking at for something like this ?

If it was refrigerated cooling then I see why it is so expensive. I had a quote for various cooling systems to be put in an apartment, one was refrigerated cooling, with ducting and outlets to 5 areas. The quote for that was close to $9k. I didn't proceed with it.

Amazingly I am in the same position with another IP at the moment. The heat exchange on the ducted heating unit has packed up and the motor/unit is being replaced. Cost is $1950 for a Brivis unit including installation. Of course the ducting is unaffected. Might try the private ruling route as well and see how I go.

 

[jossiegas5]

I think your appliances in is need of replacement. Better to buy a new one rather than to repair it.

 

[Rob G.]

Don't forget the immediate write-off of any remaining capital allowances on the old system.

Don't forget any insurance claims are part of the termination value.

Cheers,

Rob