Are renovations included in my depreciation schedule?

People often tell us about the renovations that have been done to their investment property:

“I’ve refurbished the bathroom, completely renovated the kitchen, polished the floorboards”, etc.

There is some confusion about how renovations are treated for tax purposes.

If the renovations and repairs have been done after the date of settlement then the receipts for these costs go directly to your accountant to take care of and are not included in our schedule.

If they were done before settlement (by previous owners) then they are part of the price you paid for the property. They would then be automatically included in our depreciation schedule if applicable.

An important distinction exists when purchasing a residential property with a construction completion date preceding 18 July 1985. (Dates for business properties vary, so to keep it simple we’ll stick with residential).

Any renovations completed after that date are eligible for Div. 43 Capital Works allowance.

Any renovations completed before that date are not eligible for Div. 43 Capital Works allowance.

So if you are buying a pre-1985 residential investment property that has been renovated since then, it is good to try to find out as much as possible about what the renovations and repairs consist of and the associated costs, because you can claim the depreciation allowance as part of your tax deductions.

We look for these things as part of our inspections anyway, but it always helps to have information that is as accurate as possible.

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