Australian spending on renovations hit $31 billion last year. People are investing in renovation projects on their properties as an alternative to a complete upgrade. TV shows such as “The Block” and “The Renovators” have become popular and are providing inspiration and ideas for home owners to renovate their properties. Property owners are often unaware of tax deductions available. It is possible for Australians to claim thousands back after renovating a property which generates income.
Renovations can be expensive, so it makes financial sense to take full advantage of the tax depreciation deductions available. As a building gets older, items wear out – they depreciate. The Australian Taxation Office allows property owners to claim this depreciation as a deduction. Depreciation can be obtained by any property owner who obtains income from their property.
To ensure property owners are making the most of the tax deductions available, they should consider a pre-renovation depreciation schedule. Old assets within a property can be worth thousands of dollars. When these old assets (like carpet and hot water systems) are removed, the owner may be entitled to claim them as a tax deduction. A Quantity Surveyor, who is qualified to calculate values and construction costs, can ensure the owners are not throwing dollars away. Essentially, if an item is removed or replaced as a result of a renovation, the current value of the item can be written-off as a tax deduction in the year the expense is incurred.
A Quantity Surveyor will complete a schedule prior to a renovation or refurbishment to identify the value of all assets already existing within the property. A second schedule is then prepared after completion of the renovation, identifying the value of all new assets within the property. The removed assets can be written-off immediately. Depreciation deductions are also available for the structure of qualified buildings.
Any construction (such as a new roof, walls or ceiling) carried out after 18 July 1985 (residential property) and 20 July 1982 (non-residential property) is eligible for the capital works allowance (Division 43).A Quantity Surveyor who specialises in tax depreciation will always take into consideration renovations carried out by previous owners as this becomes an additional tax benefit for the current owner. Always consult a depreciation expert about an investment property’s depreciation entitlements.
Taking full advantage of the available tax benefits on an investment property can improve a property owner’s cash flow each financial year. BMT Tax Depreciation offer obligation free advice about a property’s depreciation potential pre and post renovation. Simply call 1300 728 726 to discuss any property scenario.