Investment Property Claiming Renovations?
Saturday, October 17th, 2009 at
4:30 am
Ok I had bought an investment property in Perth (August last year) and I renovated it straight away spending $15 000 (total) on a new kitchen, bathroom, tiles painting etc it needed the renovations as it wasnt the best place to get a decent rental income. I went and saw my accountant last week and he told me I was unable to claim the $15000 i spent on the renovations (because of something about capital renovations or purchases) but I can claim a discount off the capital gains tax when i sell the property. Im 24 and dont want to sell it for at least 15 years. Is this right? Iv spent 15 000 on genuine renovations but I cant claim this? Please help. Thank You.
Passive Income
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Tagged with: Accountant • Investment Property • Kitchen Bathroom • Property In Perth
Filed under: property renovation
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I’m terribly sorry, but your accountant is 100% correct.
In the eyes of the ATO the renovations you did are too soon to the production of assessable income – that is, you did them before the property was available to rent and producing income. Essentially the are improvements to the property (ie increasing the value of the property) not repairs (which simply maintain the existing property), so no immediate deduction.
Instead they are counted as capital expenditure and is added to the cost price of the house, so when you sell it, the cost base is higher, and hence the capital gain is reduced.
A lot of people get caught out with early renovations.
You should consult your accountant to see if you are able to claim a Capital Works deduction. This is a small depreciation claim (2.5%) you can make on the construction costs of the property, but will depend on the age of the property. You may also be able to depreciate furnishings such as carpets, curtains & blinds, or appliances such as dishwashers or hot water systems. You’ll probably need a Quantity Surveyor report, but as I said, talk to your accountant, they know your situation so they’ll be able to give you the best advice. They seem to be on the right track so far.