Many investors don’t realise they can claim depreciation of renovations completed by previous owners. When you purchase an investment property that is not brand new, any improvements or additions completed on the property, prior to your purchase will be considered for depreciation purposes. The fact that you may not know when the work was completed, or how much it cost, doesn’t matter. A quantity surveyor is qualified to estimate those details and ensure your deductions are maximised.
A good quantity surveyor will create a time-line of the history of the property to professionally estimate the date and cost of previous construction works and assets. It is important to note that very few professions are recognised as qualified to estimate construction costs and asset values. Quantity surveyors are recognised by the ATO for this purpose, but accountants and real estate agents are not. The only way to maximise the depreciation claims available in an investment property is by using a quality schedule prepared by a professional quantity surveyor.
In 2014, Mel and Scott purchased a 50 year old house in the inner eastern suburbs of Sydney as an investment property. The property had undergone some substantial improvements over time, and at some stage a previous owner had added a garage and a large entertaining deck, and completed an interior renovation.
Our experts were able to produce a timeline of the property and identify thousands of dollars in depreciation deductions claimable for Mel and Scott.
As the property was so old there were no capital works claims left in the original structure. However, the garage and deck built in 1999 were costed at $45,000 combined. As more recent additions they were still depreciating at a value of $1,125.00 pa, and with 24 years effective life remaining, represented total deductions for Mel and Scott equal to $27,000.
The kitchen and bathroom assets and styling indicated to our experts that a major renovation had been completed in 2009. The major renovation included full kitchen, bathroom and laundry upgrades, new carpet throughout, blinds, air-conditioning, light shades, built-in wardrobes, interior and exterior paint, electrical re-wiring, new plumbing and some hard landscaping. The works generated new deductions for both Division 43 Capital Works, plus Division 40 Plant and Equipment. Keep in mind that the assets are revalued each time the property changes hands. So assets that may have been depreciated down by a previous owner will be assigned a new value and effective life at the time of purchase of the new owners.
Deductions identified for Mel and Scott for the 2015 financial year were $11,234.00, and $10,262.00 for the 2016 financial year. All for an old 1960’s property they had done virtually no work to themselves!
If you own an investment property, the best way to ensure your depreciation deductions have been maximised is to use a depreciation schedule prepared by Capital Claims Tax Depreciation. For an estimate of deductions you may be entitled to, or to have your current depreciation schedule reviewed free of charge, please don’t hesitate to get in touch.