Putting in a new kitchen or bathroom, landscaping the garden, or any other major renovation will instantly add value to your property and potentially increase your rental income, but there are other advantages too.
Some property investors may not be aware you can claim some tax back on the depreciation of assets. If you are thinking of renovating, it is always important to list and value the assets in the property before a renovation – this should be done by a depreciation specialist or you can do it yourself.
You can then prepare a depreciation schedule of any furniture or appliances you have in the property.
While you will have an initial outlay for the renovation, here are three other ways in which you may be able to recoup some of your expenditure.
- Cost of the Renovation
Most costs associated with your property may be used as a tax deduction. If you decide, for instance to install that new kitchen, make sure you keep receipts for absolutely everything associated with the renovation.
As well as the new items you buy, you may also be able to include payments made to tradesmen working on the renovation, such as electricians and plumbers.
- Depreciation of Removed Items
Let’s take a look at that kitchen renovation again. As well as appliances such as the stove, rangehood and dishwasher, there are also other items to consider including blinds, light fittings, a sink, floor tiles, cupboards and joinery.
If any of these items are removed, they may have a remaining un-deducted depreciable value. This is known as scrapping, and you may be able to claim as a tax deduction the total remaining depreciable value for items thrown out in the year of their removal.
- Depreciation of New Items
Any new items you bring into the property, dishwashers, stoves, floor tiles etc will also depreciate in value in the same tax year, and you may find you can claim this too.
After the renovation is completed, a new depreciation schedule should be prepared listing all new additions that have been added and the existing depreciable items that will remain in the property.
When you are considering renovating your property, we always recommend you talk to your accountant or financial advisor as every situation is different.
Also, if you own a strata or community titled property, double check your renovations abide by any of the body corporate rules and regulations and you have permission to do the renovations, and don’t forget council permission may also be required for some building renovations.
If you would like to know more about property investment or the benefits of our property management services, our knowledgeable and experienced team would love to help. With over 40 years of business in the area, we are one of Newcastle’s longest established real estate offices, so give us a call on 02 4954 8833 or pop into our office for a chat.