Niseko direct flights gone? Real estate impact?

[HelperElfMissy 42]

Well...trip -we didn't end up buying anything in Niseko, so I can't say how it worked for us. It didn't. But from what hubby was saying he was going to be able to swing it that the property in Japan was offset again earnings in Oz. Don't ask me how - that is why we employ a gun accountant LOLZ! But as I say - we didn't buy - we stopped investigating - it might have all fallen flat when we tried to put it into practice.

 

Someone else might have a better understanding.

[Kingofmyrrh 0]

 Originally Posted By: tripitaka

 Originally Posted By: Mamabear

You are able to offset depreciation costs against your taxable income therefore reducing your taxable income and saving you from paying it all over to the government of your jurisdiction.

A penny saved from the tax man is akin to a penny earnt.

Hang on Mama. You're talking about negative gearing, which has nothing to do with "depreciation costs." Also, don't assume the system in Aussie is the same as in Japan.

The only possible advantage from depreciation that I think can be gained is decreasing land taxes and/or rates.

You really can offset depreciation for certain house types against your income in Japan, it's pretty well known I think. I knew a guy who offsets the depreciation of some wood frame houses he owns in the midwest (US) against his income for Japanese tax purposes.

[Stuntcok 0]

Japan is the land of tax loopholes. There are many different ways not to pay tax, you just need to be paying enough tax in the first place to make the advice pay off.

[tripitaka 0]

In that case, your property would have to be valued annually to determine its value. That's insane!

[Rag-Doll 0]

not really. you would provide an estimated value for accounting purposes. much the same way that other assets are valued/depreciated. there would be agreed and recognised methods and rates. the tax man gets his back if you eventually sell the property above the carry value in the form of cgt - subject i'm sure to a whole raft of other set offs and stuff.

[Kingofmyrrh 0]

 Originally Posted By: tripitaka

In that case, your property would have to be valued annually to determine its value. That's insane!

No offence but I think you may be a little confused about how depreciation works. Anyway I'm not a property owner so my knowledge is purely theoretical, I could be wrong.

[Stuntcok 0]

Why does it need to be revalued? Depreciation is off of book, not a current value. In corporates, only when the asset is severly "impaired" do you revise for depreciation.

[tripitaka 0]

Stunts, if you don't know "current value", how can you realize depreciation? i.e., Value at time of purchase - current value = depreciation.

 

If you only know purchase price, how can you calculate depreciation? You can't unless you have a property valuation.

 

Rag, I very much doubt you can submit a "depreciation estimate" for tax purposes. And if you can, it would have to be carried out by a registered or official body. Perhaps, the local govt does this, but they would be reluctant to "depreciate" assets as it would affect their income.

[HelperElfMissy 42]

It is normally a listed amount, such as say 10% annually for 5 years. There are amounts that have been calaculated and allowed into tax law - that's why we hire an accountant who can stay abreast of the massive annual changes that occur in tax law/rulings.

 

Each type of 'thing' has different depreciation levels as a set list. Car are depreciated faster than property (although property in Australia is usually appreciating - it is the land not the house). Business machinery etc etc all have standard depreciation that can be applied.

 

If you wish to depreciate something over and above the list amount then YES you would need a valuation.

[Stuntcok 0]

Errrrr, depreciation refers to the spreading out the cost of an asset that has multi year life over the life of the asset. For instance, when you depreciate a 10,000 dollar car over an estimated life of 10 years, you have a depreciation cost of 1000 per year that you can set against your revenue and offset tax. What you are refering to is "impariment" not "depreciation".

[Kingofmyrrh 0]

I think Triptaka is confusing depreciation as an accounting term (spreading the cost of an asset over its lifetime, if I recall remotely correctly) and depreciation as used in common speech (losing value). At any rate your equality for depreciation is no good from an accounting perspective. Wikipedia is your friend at times like these.

 

[edit: beaten to it]

[tripitaka 0]

I know I'm a moron but hang with me. I understand "depreciation" and/or "impariment". What I don't understand is how you can claim it for a tax refund on an investment property? I thought you could only claim expenses for things like maintenance and rates.

 

Mama, how can you claim depreciation as an expense when your property appreciates? That doesn't make much sense to me.

[Stuntcok 0]

The property may appreciate but the tax code says buildings depreciate, whether they do or not. How you class the original cost between property and building is essential and requires a good accountant/lawyer. There are fixed codes for different types of buildings and different rates of depreciation for, say a wasting chattel vs a class A office building. If you experience "appreciation" and sell it you will be subject to capital gains tax, which is lower (and later) than the income tax you deferred through depreciation.

[tripitaka 0]

Thanks Stunts. I've got it now. We can claim depreciation as a deductible expense. In my limited understanding, that's a massive incentive to invest in property.

[HelperElfMissy 42]

What they said!

 

Thats why I have an accountant, I am afraid I barely passed Year 12 economics! All I know is we have lots of things in the business that we claim depreciation for - it has been explained to me in GREAT detail, but you know that Simpsons episode where Homer hears "Blah blah blah blah..." after the first sentance? Well....I am kinda like that with economics/accounts/paperwork... <grin>

[stillnoprogress 0]

i'm not an accountant or a lawyer, but there are different depreciation schedules for different ages and types of structures. I've heard of Japanese depreciation schedules on old wooden strucures as low as 6 years! I think new wooden structures is 20 years and concrete is 40 years. New rules in 2007 abolished the law that you had to leave 10% of the residual value in a home. The breakdown between land / building is negotiated between buyer and seller with the buyer clearly incentivized to boost the building portion of sale price and the seller disincentivized by the meagre 5% consumption tax levied on the building portion! It doesn't take a rocket surgeon to realize how this has probably led to more than dodgy transactions than a tokyo hostess club and has probably led to much higher profits on real estate than suggested by a surface glimpse.

[tripitaka 0]

SNP, I asked a friend who owns an apartment building in Japan for investment purposes, and he doesn't know anything about being able to claim depreciation as a cost for tax rebates. Also, you cannot do it in NZ for property investment, but you might be able to do so if you are running a business of which the building/property is not the core business, i.e., a restuaurant.

[Stuntcok 0]

Your friend is not as well advised as mine, it seems, as I have many friends depreciating property for tax. It may be that the level of rent or his income tax bracket does not make the fixed cost of advisory worth it.

[Kingofmyrrh 0]

 Originally Posted By: tripitaka

SNP, I asked a friend who owns an apartment building in Japan for investment purposes, and he doesn't know anything about being able to claim depreciation as a cost for tax rebates. Also, you cannot do it in NZ for property investment, but you might be able to do so if you are running a business of which the building/property is not the core business, i.e., a restuaurant.

You should probably take into consideration the fact that in Japan being able to depreciate structures like this is not a glitch - it reflects the fact that they really do lose value and after reaching a certain age can actually be considered as negative as it is accepted that anyone who buys the land/structure package will have to pay to rip it down. In most oher countries I know of buildings just don't lose their value like this so it makes sense that similar rules may not apply.

[Fattwins 0]

Thus you wont really get the regular Japanese population to invest in apartments at ski resorts.

[tripitaka 0]

 Originally Posted By: Stuntcok

Your friend is not as well advised as mine, it seems, as I have many friends depreciating property for tax. It may be that the level of rent or his income tax bracket does not make the fixed cost of advisory worth it.

That could be the case Stunts. Could you give me an idea of what kind of threshold we're looking at? By the way you're inferring, it isn't worth the effort for an investor with an apartment or even a few houses.

[tripitaka 0]

 Originally Posted By: Fattwins

Thus you wont really get the regular Japanese population to invest in apartments at ski resorts.

Yes, whatever the tax break is, it can't be that great if you require exorbitant legal fees to acquire it.

[Stuntcok 0]

 Originally Posted By: Fattwins

Thus you wont really get the regular Japanese population to invest in apartments at ski resorts.

This is classic investment mentality. You would be surprised what people will buy after it goes up just a bit, even if there are carry costs or little intrisic value.

There was a time in my memory when no-one would buy gold. It had no worth save in small tech applications and jewlery (and silver colour was coming into fashion), the few countries that were using gold as a currency standard were selling and moving to currency based treasury, it was costly to hold, new mining technology was making it cheap etc etc. It has gone up 5 fold since then and the time to buy it was when everyone thought it worthless.

[Fattwins 0]

If the foreign investors decide to sell then things could go south in a big hurry. The number of Japanese that would swoop into the market is very small. That said the economies of China/HK/and Auz are still pretty strong so this shouldn't be a big problem. Also as most investors seem to have paid with out right cash rather than hedging and taking loans, there would seem to be a less likely chance of panic selling. (You can slap me if I'm talking out my arse)

[Stuntcok 0]

I am officially leaving this thread. I come on this site to talk about skiing when I should be working and this is starting to sound perversely like work. So, I would just like to say that the worse the Japanese economy and RE situation gets the more committed I am to my RE holdings at ski resorts as I may have to move there and pursue a career as a ski instructor or HakubaPowderLodge wood cutter person.