BMT Tax Depreciation - Help investor clients to claim deductions correctly

Repairs and maintenance are a fact of life for Property Managers. While the costs associated with the upkeep of investment properties can be a source of concern for owners, Property Managers are able to address this by advising them of the deductions they can claim when completing their annual tax return.

Australian Tax Office (ATO) legislation can have a significant impact on the deductions a property owner is able to claim for work completed on their property. In order for a Property Manager to accurately advise their clients it is important to understand what types of works constitute repairs, maintenance and capital improvements.

Repairs and maintenance

Repairs relate to work completed to fix damage or deterioration of a property. Common examples of repairs include: 

• Fixing part of a damaged fence
• Replacing part of the guttering or windows damaged in a storm

Maintenance is defined as any work completed to prevent deterioration to a property. Common examples include: 

• Painting a rental property
• Oiling, brushing or cleaning something that is otherwise in good working condition
• Plumbing maintenance
• Servicing an air conditioner

Any expense incurred for repairs or maintenance of an investment property is deductible within the current financial year.

Capital improvements

Any improvement made to the original condition of an item is classified as capital improvements. The ATO allows capital improvements to be claimed by property investors as either capital works deductions or plant and equipment depreciation.

Capital works deductions include structural additions and renovations as well as fixed items which cannot be easily removed from the property.

Examples of depreciating plant and equipment items which could qualify for deductions when improved upon are carpeting, hot water systems, stoves, lights and light fittings. The deductions which can be claimed will depend on the individual effective life the ATO set for each individual asset.


How to maximise deductions

To ensure investor clients are able to claim the maximum deductions available, encouraging them to contact a Quantity Surveyor specialising in tax depreciation is key.

By working with an investor’s Accountant, a Quantity Surveyor such as BMT Tax Depreciation is able to produce a tax depreciation schedule outlining all capital works deductions and plant and equipment items considered to be capital improvements. This schedule will also outline all available deductions for the lifetime of the property (forty years), claimable when completing an annual tax return.

Owners who are planning any renovations to their investment property should also request a Quantity Surveyor to complete both a pre and post renovation depreciation schedule, as items removed during this process may also entitle the owner to additional deductions when the items are scrapped and written off.

If you have any clients who would like more information on claiming depreciation for any investment property, speak with one of the expert staff at BMT Tax Depreciation on 1300 728 726.


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.