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NBtax Tax Bites

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Savvy Investors Renovate and Reap Rewards Through Depreciation Allowances

You’ll be surprised to discover, sometimes buying, and renovating properties with no depreciation value remaining can be a good thing. In this tax depreciation case study, our savvy clients purchased a former run-down hostel with 13 individual rooms for let. This humble property is situated on a 913sqm corner block in the trendy inner-city suburb of West End, less than 2km from Brisbane.

Recognising its potential, our clients completed extensive renovations, converting this hostel into individual self-contained apartments. Immediately, these apartments were available to lease making them eligible for depreciation allowances.

Our NBtax team inspected the properties and construction records to determine the depreciation value for the building and its assets in relation to allowances Division 43 and 40.

Among the many eligible items listed in our comprehensive depreciation schedule were:

  • Capital works – structural improvements and renovations
  • Air conditioning units and ceiling fans
  • Blinds
  • Garage doors - motors
  • Hot water installation
  • Kitchen equipment – dishwasher, range hoods, microwave, ovens, stoves
  • Ventilation fans

During the first full year, our client can claim approximately $45,057 in depreciation allowances. Over the next 40 years, property owners can claim up to $838,270 in deductions.

Depreciation allowances will enable investors to offset rental income and reduce their taxes as well as manage cash flow.

Our renovation case study demonstrates a few key lessons such as:

  • keeping detailed records of all capital works expenditure
  • purchasing new plant and equipment assets to improve the property
  • making the property available for lease immediately
  • using experienced Property Tax experts and Quantity Surveyors to prepare depreciation schedules.

Don’t miss out on valuable depreciation allowances; request a comprehensive depreciation report for your investment property here.