Swapping old for new
Question from Sue updated on 28th April 2020:
We are removing an old rented house off a property and are buying a new transportable home to replace it. (A top spec cabin to be exact). Can we claim depreciation on the brand-new cabin/house at all? And do we need to write off the value of the old house so that we are not obligated for clawback of historical depreciation claimed against it?
Our expert Mark Withers responded:
The old house should be disposed of for its scrap value. This will presumably be below its book value. This then establishes that no depreciation on the old house is recoverable but there is no deduction for the loss on disposal. If the new dwelling is a permanent house rather than a transportable building like a tiny house, for example, there is no depreciation on the building. But separately identifiable chattels that are not attached to the building may be able to be separately identified and depreciated as they are not “ building” assets.
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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