This renovation tip can save you thousands
Renovating an investment property is different to renovating your own home. Whether the renovation is big or small, you will be taking a head over heart approach and doing what will help you improve your return on investment.
Claiming depreciation deductions on the assets installed during a renovation usually isn’t front of mind. However, choosing assets for your renovation that hold higher depreciation deductions can boost your cash flow sooner.
What is depreciation?
Depreciation is the natural wear and tear of a property and assets over time.
Only owners of income-producing property can claim depreciation as a tax deduction each financial year. BMT Tax Depreciation consistently sees these deductions save residential investors tens of thousands.
A tax depreciation schedule completed by a specialist quantity surveyor, such as BMT, is the only way an investor can claim depreciation. The schedule lasts up to forty years and is 100 per cent tax deductible.
Depreciation and new assets
If you’re thinking about giving your investment property a facelift before advertising to prospective tenants, you may have a few things in mind. Maybe you want to give the interior a fresh lick of paint, change the outdated flooring throughout or do a full bathroom renovation. Whatever you’re planning to do, depreciation on the assets you choose should be a key consideration.
For example, floor coverings such as carpet, floating timber and vinyl are called plant and equipment assets. Each asset has an effective life and is depreciated using the diminishing value or prime cost method.
Case study: claiming more sooner following renovation
Casey owns an investment property, and she has decided to renovate it now and sell it in two years’ time.
She wants to ensure that she claims the most depreciation possible in the two years following the renovation. Her two flooring options are vinyl flooring or floating timber floorboards.
Before deciding what flooring to use she consulted a specialist quantity surveyor, to find out what’s the best option from a depreciation perspective. The specialist advised that given her short-term investment strategy, vinyl may be the better option.
This is because vinyl has a diminishing value rate of 20 per cent, while floating timber floorboard diminishing value rate of 13.33 per cent. This means Casey can claim more sooner from vinyl flooring. Furthermore, vinyl generally requires less maintenance than timber floorboards do which is ideal for an investment property.
Contact the specialist or Tax Accountant prior to your renovation
Whether you’re turning your previous home into an investment or giving your current rental a facelift, consulting a tax depreciation specialist and your accountant will help you claim the most. BMT Tax Depreciation has helped thousands of investors claim lucrative depreciation deductions following an investment property renovation.
To learn more about depreciation, visit BMT’s website or Request a Quote.
BMT Tax Depreciation is Australia’s leading supplier of residential and commercial tax depreciation schedules.
Bradley Beer (B. Con. Mgt, AAIQS, MRICS, AVAA) is the Chief Executive Officer of BMT Tax Depreciation. Please contact 1300 728 726 or visit bmtqs.com.au for Australia-wide service
General Advice Warning
The material on this page and on this website has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained on this page and on this website is General Advice and does not take into account any person’s particular investment objectives, financial situation and particular needs.
Before making an investment decision based on this advice you should consider, with or without the assistance of a securities adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances. In addition, the examples provided on this page and on this website are for illustrative purposes only.
Although every effort has been made to verify the accuracy of the information contained on this page and on this website, Chan & Naylor, its officers, representatives, employees, and agents disclaim all liability [except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this website or any loss or damage suffered by any person directly or indirectly through relying on this information.