1 – How are renovations treated in tax depreciations?
If you are an investment property owner, it is possible to claim the depreciation renovations of your property. For this, you need a Quantity Surveyor to calculate the deductions on your behalf. If the renovation on your property started before July 1985, you still can claim depreciation on that work. This is regardless of who actually paid for the renovation, as long as you are utilizing that property for income producing reasons. Even trivial renovations can gain you significant amount of depreciation.
Depreciation of pre-purchase additions and improvements are visible on many homes and even older ones have experienced some capital renovations and additions over time. Investors are eligible to claim tax depreciation for work that was done to their investment property by old owners, even if they are unaware of the dates and costs of old works. Quantity surveyors are recognized by the ATO to be qualified to assess construction costs. The experience and skill-set of your quantity surveyor can effectively date and cost the works of a property, and generate a timeframe of the history of that property, for calculating capital works or tax depreciation deductions.
Most of the improvements and additions completed on a property over time, even by previous owners, become eligible for tax depreciation for the current owners. The more substantial and recent the improvements and additions have been made, the greater the deductions claimable. As far as renovations and depreciation including disposal of assets or scrapping is concerned, the purchasing of older or worn down properties for improvement and holding has gained much popularity. All the work you perform for improving the property in preparation can be qualified for tenants, it increases depreciation, and also raising the tax depreciation claims deductions obtainable by you for that property. Many factors like budget, costs, target market, and durability determine what part actually an owner or investor would consider to renovate. Precisely, any effective life technically alive within the assets carries a value, and this value turn into an instant write-off when the item is scrapped. Investors’ self labor in finishing the renovations or improvements would not be incorporated in calculating the depreciable construction cost. Money paid to an external labor for renovation is eligible to be treated as construction costs and thus claimable. The legislation of tax depreciation must have actual costs be reported as and when available.