Transforming Your Rental Property: More Than Just Aesthetics
Welcome to the world of property investment! Imagine you’ve just bought a rental property. You’re not just looking at a fresh coat of paint or a kitchen makeover; you’re looking at a goldmine of tax deductions in Australia. Let’s dive into how renovating your rental can be a smart financial move.

The Tax Deduction Trio: Repairs, Maintenance, and Capital Improvements
Before you start, it’s crucial to understand the differences between repairs (like fixing a damaged wall), maintenance (routine tasks like painting), and capital improvements (major upgrades like adding a room). This distinction is key because the Australian Tax Office (ATO) treats these expenses differently on your tax return.

Why This Matters
Why bother with these distinctions? Well, while you can claim immediate tax deductions for repairs and maintenance, capital improvements are a different ball game. They are depreciated over time, offering extended tax benefits.

Depreciation: Your Tax Deduction Friend
Depreciation is all about the value loss in your property over time. There are two kinds: capital works (for structural improvements) and plant and equipment (for items like appliances). Renovations can enhance your depreciation claims significantly, especially with the 40-year depreciation timeline for capital works.

Navigating the 2017 Legislation Changes
A crucial update here: Since 2017, only brand-new properties can claim depreciation for plant and equipment. So, if you’re renovating an existing property, you can only claim for new items you add.

The Power of a Tax Depreciation Schedule
Don’t overlook getting a tax depreciation schedule from a qualified quantity surveyor. This document is your roadmap to all the depreciation deductions you can claim.

Scrapping: Another Tax Perk
Renovating often means removing old assets. Here’s where scrapping comes in – you can claim the remaining value of these old assets as a tax deduction.

Renovations by Previous Owners: Still a Win for You
Good news! Even if you buy a property that was renovated by someone else, you can still claim deductions on those improvements.

Renovations and Capital Gains Tax (CGT)
Remember, renovations that are capital improvements can affect your CGT. They add to your property’s cost base, potentially reducing your CGT when you sell.

Key Takeaways for Savvy Investors
To make the most of your investment, remember: differentiate between expenses, understand depreciation, be aware of legislative changes, make the most of scrapping, claim for previous owner renovations, and always get a professional tax depreciation schedule.

Ready to boost your property investment returns? Reach out to our partner Duo Tax Quantity Surveyors for expert advice and a tailored tax depreciation schedule.