What Chattels can be Depreciated?

When a rental property is purchased, many investors get a chattels valuation on the property so that the value of the chattels can be split from the value of the land and buildings. If no chattels valuation is done, then no depreciation expense claim is available.

The IRD policy is that an item in a rental property can be separately depreciated if that item is distinct from the building. To determine whether an item is part of or separate from the building, the following tests should be applied:

(1) If the item is not attached to the building, then it can be depreciated separately.
(2) If the item is integral or firmly attached to the building, then it must be depreciated as part of the building.

The following items are considered to be separate chattels:

Air conditioners (through wall type)
Air ventilation systems (in roof cavity)
Alarms (wired or wireless)
Appliances (small)
Awnings
Bedding
Blinds
Carpets
Clotheslines
Crockery
Curtains
Cutlery
Dehumidifiers (portable)
Dishwashers
Drapes
Dryers (clothes)
Freezers
Furniture (loose)
Glassware
Heaters (electric)
Heaters (gas, portable & not flued)
Heap pumps (through wall type)
Lawn mowers
Light shades (excl the light fitting)
Linen
Mailboxes
Microwave Ovens
Refrigerators
Satellite receiving dishes
Stereos
Stoves
Televisions
Utensils (incl pots and pans)
Vacuum cleaners
Washing machines
Waste disposal units
Water heaters (over sink type)
Water heater (hot water cylinders)
Water heaters (solar)

So, lets say that you spend $2,000 on a new garage door. As the IRD consider a garage door to be part of the building and there is no increase in capital vale to the building because of the new garage door, this cost would be treated as repairs.

Lets say you spend $12,000 putting in a new bathroom. If that bathroom renovation increased the capital value of the building, then this cost would be treated as a capital improvement, added to the cost of the building and depreciated at the building rate of 0%.

Disclaimer: The above article is general in nature and we recommend you seek professional advice tailored to your specific personal situation.