Capital works deductions are income tax deductions an investor can claim for the wear and tear that occurs to the structure of the property or items considered to be permanently fixed to the property. This includes any structural improvements that may have been made during a renovation.

As an investor, it’s important that you have a good understanding of the depreciation deductions you can claim to ensure you’re getting the most out of your investment property.

Capital works deductions

In a residential property, capital works deductions cover the following items:

• Bricks, mortar, walls, flooring and wiring
• Built-in kitchen cupboards
• Clothes lines
• Doors and door furniture (handles, locks etc.)
• Driveways
• Fences and retaining walls
• Sinks, basins, baths and toilet bowls.

In commercial properties, capital works deductions cover the following items:

• Bricks, mortar, walls, flooring, roofing and wiring
• Sinks, tiles, basins and toilet bowls
• Mezzanines
• Ducting for air conditioning.

Is my property too new to claim these deductions?

As a general rule, any residential property built after 15 September 1987 will receive capital works deductions at a rate of 2.5% per year for up to forty years. In a commercial building, capital works deductions generally apply where construction commenced after 21 August 1984.

If your property was constructed prior to these dates, it’s still important to get in touch with a qualified Quantity Surveyor, such as BMT, as often these buildings will have undergone some form of renovation which can result in capital works deductions for the owner.

If you have any tax queries relating to your investment property or are planning to rent a property in the future please contact us for taxation advice to maximise your deductions. Call 03 5443 0344 or email afs@afsbendigo.com.au

Article provided by BMT Tax Depreciation.

Bradley Beer (B. Con. Mgt, AAIQS, MRICS, AVAA) is the Chief Executive Officer of BMT Tax Depreciation.
Please contact 1300 728 726 or visit bmtqs.com.au for an Australia wide service.

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