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How To: Carefully claim deductions when renovating

By Naomi Foxall โ€ข Leave a Comment

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Before renovating an investment property, there are a number of factors investors should be aware of, particularly as any work completed could impact the deductions available to be claimed. Below are a few considerations investors should make in order to reap the maximum rewards both in terms of adding value to the property and at tax time.

Carefully claim deductions when renovatingHow To: Carefully claim deductions when renovating

1. Claim depreciation for renovations completed by a previous owners –ย Often when an investor purchases an older property, at some stage since the buildingโ€™s original construction, renovation work may have been completed. Although the ATO restricts property owners from claiming capital works deductions for properties constructed prior to the 18th of July 1985, they can claim capital works for renovations completed after this date, even if the work was completed by a previous owner. Quantity Surveyors will discover any previous renovations, even less obvious ones like new plumbing or electrical wiring, during a site inspection of the property.

2. Be aware that any work completed to an income producing property could affectย depreciation deductions – ย Investors often make the mistake of claiming renovations as repairs and maintenance. This can put them at risk of an audit by the Australian Taxation Office (ATO). The ATO provide clear definitions on the difference between repairs, maintenance and capital improvements. It is important to get it right to ensure deductions are correct and maximised. As a general rule, repairs are classified as work completed to fix damage or deterioration to a property, for example replacing part of a damaged fence. Maintenance on the other hand is work completed to prevent deterioration of the property, for example servicing a hot water system. Capital improvements occur when any work completed enhances the condition or value of an item beyond its original state at the time of purchase. This work must then be classified as a capital works deduction or as plant and equipment and depreciated over time.

3. Ask a specialist Quantity Surveyor about the deductions available beforeย renovating ย – Renovations impact the depreciation deductions available for an income producing property. Owners should consult with their specialist Quantity Surveyor prior to starting any work. This is because any items removed may have a remaining depreciable value that can be claimed as an immediate deduction in the year the asset is removed and replaced. This is a process known as โ€˜scrappingโ€™. Once the renovation is completed, the Quantity Surveyor will perform a second inspection to capture details of all of the new structures and assets added to the property. An updated depreciation schedule will be produced to include the details of the deductions an investor can claim for both pre-existing assets and structures and the new items which have been added to the property

4. Choose new assets carefully when renovating to maximise future deductions –ย Different asset types will affect the depreciation deductions available. For example, when looking at flooring valued around $2,000 the different types have a very different result. The below table demonstrates the difference in deductions for the owner for flooring:Carefully claim deductions when renovatingThe same rule applies when claiming deductions for air conditioning. Below are the expected deductions for a property owner who owns $5,000 of cooling equipment:Carefully claim deductions when renovatingAlways consult a depreciation expert about an investment propertyโ€™s depreciation entitlements. Taking full advantage of the available tax benefits on an investment property can improve a property ownerโ€™s cash flow.

Article written by Chief Executive Officer of BMT Tax Depreciation, Bradley Beer (B. Con. Mgt, AAIQS, MRICS, AVAA).ย Please contact 1300 728 726 or visit www.bmtqs.com.auย for more information on how BMT can help you.

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April 14, 2017

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Wallpaper in every single room! What do you recko Wallpaper in every single room!

What do you reckon? You'd think it would be overkill but it isn't because so many of the designs are subtle yet still impactful.

Head over to the blog to see how @grafico_walls transformed this blank canvas Melbourne townhouse with their products, which you've probably seen on The Block over the years. And read how Damian Corney has grown this Melbourne business with wife Adele and a growing team. There's also a look inside the very cool Motley Hotel which has used a whopping 4km of their wallpaper throughout!

You can also watch a video tour with Bec Douros as the house featured on Open Homes Australia over the weekend.

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Kids and fluffy chickens. Does it get any cuter?! Kids and fluffy chickens. Does it get any cuter?! 

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Feeling relaxed ๐Ÿฅฐ
Did you see this cracking little transformation on Did you see this cracking little transformation on @sellinghousesaus last night?

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Our friends at @mintdesignau have done it again!

Homeowner Briony Marsh says: Itโ€™s totally changed our home lifestyle now we can sit outside on the lounge in the sun or shade, be in the pool, spa, sauna or cooking pizzas and hanging out with friends. It sounds cliched but it really feels like we are on holiday at home!โ€

Head over to the blog to see the finer details, including a sauna and a seriously good looking copper pizza oven. There's a lot packed into this space!

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Swipe for before & afters of today's real reno. L Swipe for before & afters of today's real reno.

Located inside a 1912 sandstone villa in Adelaideโ€™s Kensington, this bathroom makeover combines classic and contemporary elements that complement the homeโ€™s original, period features. 

Designed by the homeโ€™s owner @designby_Tahirih, who is a property stylist too, the renovation came sooner than expected after water ingress made the makeover of their only bathroom an urgent necessity!

The whole project cost an impressive $20k, project managed herself.

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I remember the chair being such a key purchase whe I remember the chair being such a key purchase when I put together my first ever baby room for Seb. I spent many an evening relaxing on mine while pregnant as I tried to get my head around impending motherhood! Not only are glider recliners like the Chelsea fromย @iltuttoย the most comfortable chairs EVER for those many hours spent feeding and settling, why shouldn't they look this good too, am I right?!

Did you love your nursery chair? Did it look this good?!

See more on the Il Tutto Chelsea Glider Recliner Chair via link in bio now.

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Here's a sneak peek of the kitchen and powder room Here's a sneak peek of the kitchen and powder room to whet your appetite! 

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Pix by @mareehomer.photography and styling by Jackie Brown.

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Handcrafted from wool, it features a rustic check design with a rainbow of nostalgic colour. Embroidered edge stitching furthers its handcrafted feel. 

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Head over to the blog now via link in bio to see more, including Phoebe's 5 faves.

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About Naomi Foxall

Naomi Foxall is a freelance writer, content and social media manager, living on the NSW South Coast.

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