Can I Claim Prior Renovations
It’s not uncommon for investors who purchase existing properties to assume that any renovations which have taken place prior to settlement cannot be claimed.
Those who assume this couldn’t be more wrong. Deductions for income producing properties can be claimed in two ways, as capital works deductions for the building structure and as plant and equipment depreciation for any easily removable assets.
Restrictions apply to capital works deductions based on the construction completion date of the property. However, there are no date restrictions for plant and equipment assets, which are deducted based on an individual effective life as outlined by the Australian Taxation Office.
While owners can claim capital works deductions on any property constructed after the 15th of September 1987, often older properties will have been renovated. Owners of both old and new properties can claim renovations done by previous owners so long as the work was commenced within the legislated dates.
Capital works deductions are calculated based on the historical cost of construction at a rate of 2.5 per cent over forty years. If an investor purchased a property constructed prior to 1987, but a renovation was completed in 2005, they will be entitled to claim the remaining years’ capital works deductions for the cost of any new structural renovations.
To ensure deductions are maximised for any investment property, it’s recommended to seek advice from a specialist Quantity Surveyor and obtain a comprehensive tax depreciation schedule.
Article provided by BMT Tax Depreciation.
Bradley Beer (B. Con. Mgt, AAIQS, MRICS) is the Chief Executive Officer of BMT Tax Depreciation. Please contact 1300 728 726 or visit www.bmtqs.com.au for an Australia-wide service.