More and more Australian investors are choosing to renovate their investment properties before leasing them
out. However, investors who live in the property while renovating risk missing out on thousands of dollars in
property depreciation deductions.
The Australian Taxation Office allows owners of income-producing properties to claim depreciation deductions
for the natural wear and tear that occurs to a building and its assets over time. Depreciation can be claimed
for a building’s structure via capital works deductions and for the plant and equipment assets contained within
the property.
According to legislation introduced in 2017, investors are unable to claim deductions for the decline in value of
previously used plant and equipment found in second-hand residential properties. If an investor lives in their
rental property while renovating, any newly installed assets will be classed as previously used. Therefore, the
investor is potentially risking their tax benefits. Unless there is good reason, investors who are planning on
installing new plant and equipment assets should make these additions after they move out of the property
and it has been listed for rent. This will ensure they’re eligible to claim the maximum depreciation deductions
available.
The 2017 legislation does not affect buyers of brand-new property, residential properties considered to be
substantially renovated or commercial properties. Capital works deductions for structural assets such as new
walls, kitchen cupboards, toilets and roof tiles are also unaffected by the legislation changes and can still be
claimed by owners of income-producing properties.
To ensure you aren’t at risk of missing out on valuable deductions, contact a specialist quantity surveyor to
organise a tax depreciation schedule before starting renovations.
Article provided by BMT Tax Depreciation.
Bradley Beer (B. Con. Mgt, AAIQS, MRICS, AVAA) is the Chief Executive Officer of BMT Tax Depreciation.
Please contact 1300 728 726 or visit www.bmtqs.com.au for an Australia wide service.