Do you know the estimated useful life of your investment property’s chattels? Toni Heath, Business Development Manager, discusses the useful life of property chattels.
If you own a rental property then you should be familiar with the chattels of the house. Chattels refer to removable items that are not fixed to the property that can be depreciated separately e.g. fridge, stove, dishwasher, blinds, carpets, and curtains, just to name a few.
All chattels have a shelf life and it is a landlord’s responsibility to ensure that chattels are maintained to a reasonable state of repair. The requirement to replace any chattels will be dependent on the condition of the item. Each chattel has what is called an ‘estimated useful life’, meaning how many years the depreciable asset is estimated to be operational/valuable.
Landlords should be aware that the Tenancy Tribunal base claimable values on the IRD depreciation rates and insurance guides. To help you understand how this works we have provided you a table on the estimated useful life of different chattels. Chattels as a default class have an estimated useful life of 5 years, but this varies greatly when looking at specific Chattel items.
The chart below is a guide provided by IRD, known as the General Depreciation Determination DEP 80: Residential Rental Property Chattels. Although it is only a small sample of what is included, you can view the entire list here. This guide helps to show what our Property Managers work to when they put in a claim against tenants for damage or excessive wear and tear.
In the video above, Business Development Manager Toni Heath uses the example of carpets to discuss the useful life of chattels. Carpets usually have the useful life value of 8 years, if for example the original value of the carpet was $100, you would divide the number of years by the cost, so $100/8 = $12.50, then you would multiply the actual life figure, if this examples case its 4 years, by the $12.50 to get $50.00. This is how much you would be able to claim for.
|Chattel||Estimated Useful Life (years)|
|Carpets (varies on quality||8|
|Air conditioners and heat pumps (through wall or window type)||10|
*Image source: https://www.classic.ird.govt.nz/technical-tax/determinations/depreciation/depreciation-deter-dep80.html
At one of our Property Investment Seminars, Galina Bell, Tax Principal, RSM New Zealand, gave us an overview of depreciation and what you can depreciate on a residential rental property. Check out the seminar article on our website to learn more about deprecation.
The IRD also allocates percentages to specific chattels that refer back to useful life, these can be depreciated in two ways, Diminishing Value, and the Straight Line method. We recommend that you talk to your financial advisor for further information around this.
if you have any questions about the chattels in your property, feel free to get in touch n the below form.