Recouping renovation expenses only once a property is sold is an outdated way of keeping an upper hand on property expenses and often forgotten as a silver arrow in a property manager’s quiver.
Many property managers are unaware that an effective tax depreciation schedule can drive an increase in rental yield or capital gain and deductions may even be claimed on renovations the previous property owners had completed.
According to BMT Tax Depreciation, should some renovations be new to a property, a quantity surveyor can be used to ascertain a higher level of depreciation for any structures or fittings that have not had a higher level of depreciation claimed.
For property investors, such purchases can increase the value of the property if going to market for a sale or to find an ideal tenant. Property depreciation deductions are then used to offset the initial cost.
By law, depreciation can be claimed as a tax deduction to any renovations made to an income-producing property.
Outdoor equipment which does qualify for the Capital Works Allowance such as garden sheds, retaining walls, swimming pools, filters and pumps, and even the humble clothesline, can reap hundreds if not thousands of dollars through depreciation.
Such ‘backyard assets’ can be considered as capital works or plant and equipment items, with both offering differing rates of depreciation across their lifespan.
Capital works projects are categorised to the original cost of the structure and fixed (non-removable) assets. The term 'plant equipment' refers to any removable fixtures or fittings, with different depreciable rates able to be claimed over the life of each different asset.
For more information on property-related tax deductions or advice on which structures may fall under the Capital Works Allowance, go to the BMT hub: