Repairs or Renovation - Not all is lost

Let’s say you’ve gone full steam ahead and just wiped the final dust from your upscale bathroom renovation.

But you’re a little deflated, knowing that you’re unable to receive an immediate tax deduction on the impressive upgrade you’ve funded.

Fortunately, there’s still an opportunity to gain a return on the costs of an improvement, although you won’t be able to do this off the bat with a tax return, but instead by claiming a capital works deduction.

The ATO specifies what capital works expenses can be claimed, which include "building construction costs, the cost of altering a building, and the cost of capital improvements to the surrounding property”.

Whether you’ve transformed a fixer-upper into a sparkling new rental immediately after settling the purchase; ripped out all the eroded kitchen cupboards to make space for new ones; entirely replaced a fence or added an extension to a property, these may all be claimable as capital works deductions – but you must claim them over a number of years, and you can only do so if the work meets certain conditions.

Structural improvements area also deductible through this means, as well as any costs associated with hiring an architect, engineer, or surveyor, and any fees related to building permits and excavations.

However, the property has to have been erected after 17 July 1985 to be eligible for capital works deductions, and what you get back in your pocket will be shaped by the nature of the construction work and the date you began it.

While it’s advantageous to conduct independent research on what costs can be claimed from work done on investment properties, it’s also advisable to meet with a qualified accountant or tax agent to get their advice on your particular situation.

Considering the range of works that can be conducted on a property, the varying scenarios from investor to investor, and the need to adhere to tax law and certain conditions, a professional is best placed to ensure that your claim is both strong and accurate.

RealRenta has all the tools that a property manager has, but at over ¼ the cost of a property manager.

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Jason Gwerder
Tuesday, 29 June 2021

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