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
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out
Jason Gwerder
Tuesday, 29 June 2021
