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Leon
Leon, Solicitor
Category: Australia Law
Satisfied Customers: 42658
Experience:  BEc Dip Ed, Dip Law (SAB) MTax (UNSW)
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Our accountant depreciated out cars and since we have sold

Customer Question

Hi Our accountant depreciated out cars and since we have sold them. he now claims because we sold them we have incurred a rather large tax debt as it is income based my question is why did we write them off in the first place
JA: How old is the vehicle? When was it purchased?
Customer: i ll check hang on
JA: Because laws vary based on location, what state are you in?
Customer: 2013
JA: Anything else you want the lawyer to know before I connect you?
Customer: South australia sold in 2015
Submitted: 1 month ago.
Category: Australia Law
Customer: replied 1 month ago.
Our accountant claimed we directed to depreciate the cars in full. We have never provided such communication and I have asked for the evidence in writing.
He also claims we did not advise the sale of the car.
Being new to business we weren't sure that we needed to but that was adjusted in 2014/2015 tax return.
Where do we stand?
Customer: replied 1 month ago.
I am interested why our accountancy firm depreciated the cars in full without our permission or advice to do so.
We now incurred a tax debt as it has been assessed as income.
The car that was sold also was adjusted in our 2014/2015 tax return. He has made another adjustment in our 2015/2016 tax return stating the larger than normal debt is from this sale.Are accountants liable for doing such a depreciation and then occurring a large tax debt for us if we didn't advise them to do so or do we have a case for negligence?
Expert:  Leon replied 1 month ago.

My name is ***** ***** I am a NSW Solicitor. I will do my best to assist you with your question.

Expert:  Leon replied 1 month ago.

Good Afternoon

I assume that they were used for business purposes and that is why you were depreciating them. The tax debt is the difference between the written down proceed and what you sold them for. This is closed as profit.

During the depreciation period that amount was deducted from your income and you did not pay tax on that amount.

The cars are usually depreciated over a period of 8 years maximum depending on the method used. Here is some information.

https://atotaxrates.info/tax-deductions/work-related-car-expenses/depreciation-of-vehicles/

If he depreciated them at 25% then the full value was deducted in 4 years.

You signed the returns and you give them instructions. if you are saying that he has acted on his own then you can complain about him. But you cannot get the benefits twice. If he redoes the last 4 years of returns you have to pay tac on depreciation and then you can avoid paying it now.

Either way you will have paid tax to the ATO.

I hope this makes sense and is of assistance. If there is nothing further

thank you for using my services.

If I have missed anything, or you have any further questions please let me know

If there is anything else in the future please do not hesitate to ask.

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Regards

Leon