Depreciation Myths – Part 3: “Renovations Were Completed by the Previous Owner So I Can’t Claim Them”

hope you have got something out of the articles so far, it has been great to hear all of your feedback and start the conversation on depreciation. Following on from Depreciation Myths – Part 2: “My Property is Too Old to Depreciate”, it’s time to squash another myth. I love this one as this is where a QS can really add value and increase your cash flow.

“Renovations were completed by a previous Owner so I can’t claim them!”

There is no truth to this statement. This is where we as Quantity Surveyor’s come in to our own. It does not matter if the works were undertaken by a previous Owner, when you purchased the investment property you have also purchased the entitlement to claim depreciation on all of the property’s improvements. We are the most suitably qualified and recognised profession by the Australian Tax Office to estimate the value of renovation works undertaken to the property and also estimate when the works were undertaken. We use a trained eye when inspecting the property, draw upon our extensive construction knowledge, utilise historic council records and building searches and we use historical photos of the property as the basis for our calculations. Our experience could save you thousands of dollars.

Most houses 10+ years old will have had works done. The most typical being:

• Bathroom – commonly worth up to $15,000
• Kitchen – commonly worth up to $20,000
• Floor & Wall Tiles – commonly worth up to $5,000

On a 10-30 year old property there is $40,000 right there which you could be missing out on if you didn’t get a QS to do a depreciation schedule for your investment property.

If you are about to renovate your investment property it may be worth getting a QS to undertake a pre-renovation inspection. This inspection allows a QS to identify what assets or capital works you are going to demolish or throw out. Did you know that you are entitled to assign a value to these assets and write them off as an immediate tax deduction? It is easy to get narrow minded when renovating as you are wanting to complete the renovation as quick as you can so that you can get a tenant back in paying rent, but a pre-renovation inspection and ‘scrapping report’ can save you thousands which can offset your loss made through the renovation period.

Renovations to an investment property, whether undertaken prior to your purchase or if you are undertaking them yourself, are a gold mine if you utilise your depreciation entitlements correctly. It is well worth contacting us to arrange a depreciation schedule for your investment property today. We guarantee the value of our service.

For more information please don’t hesitate to email me on [email protected], visit gqs.com.au or call 1300 290 235 to speak to a tax specialist today!