Claiming Depreciation on Investment Property Renovations

Do you own an investment property?

Did you know that you are entitled to claim depreciation on renovations completed after July 1985, regardless of who paid for them?

The ATO allows property investors to claim a deduction due to wear and tear of a building structure and its fixtures over time, called depreciation. You can claim 40 years worth of deductions on renovation construction costs (called “capital works”) at a rate of 2.5% per annum. You can also claim depreciation on the useful lifespan of “plant and equipment” items such as blinds, dishwashers and flooring, although rates will vary depending on each individual item. “Residual value deductions” (or “scrapping”) is a write off that allows you to claim the balance of depreciation left on items when you throw away or demolish them. Of course, each case can vary and it is best to consult with a credible provider of tax depreciation schedules and contact a quantity surveyor to properly evaluate the value of renovation items.

If you’re thinking of renovating your investment property, apart from seeking specialist advice, here are some tips to ensure you get the most out of the procedure:

Arrange a tax depreciation schedule before starting any work – to avoid missing out on any valuable deductions.

Install new assets that maximise future deductions – selecting the right assets can make a substantial difference to future deductions.

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Get a depreciation schedule after renovations are completed – showing any removed assets and depreciation deductions available for all new installments.

Take into account the cost of items – individual items that cost less than $300 can be written off immediately, so it’s worth keeping this in mind for smaller items such as microwaves.

If you are thinking of purchasing your first investment property, our Asset Management team can provide you the very best support in ensuring your transition to investment property owner is a smooth one. You can contact them here.

The information provided in this article is for use of a general nature only and is not intended to be relied upon, nor be a substitute for, specific professional advice from a financial adviser.

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