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Posted: 2021-08-03 03:19:22

If there’s one thing property investors should be especially aware of this financial year, it would be updating their tax depreciation schedule to include rental property improvements.

CEO of BMT Tax Depreciation Bradley Beer warned investors about the likely scrutiny that could arise should they forget to update their tax depreciation schedule before lodging their tax return.

"There are nuances when it comes to claiming work on investment properties, with differences between how a renovation and general maintenance is claimed at tax time," he said.

Mr Beer said investors might make inaccurate claims, which end up being costly and being subject to legal scrutiny by the Australian Taxation Office (ATO).

He said investors should always keep in mind that alterations that go beyond the original state of a rental property should be claimed with depreciation.

"Because improvements are often required due to wear and tear or damage, investors mustn’t mistake them as repairs or maintenance, and should include them in their tax depreciation schedule.

"An improvement is retiling a bathroom, while fixing cracked plaster is a repair and oiling a deck is maintenance."

Many investors are tempted into claiming these improvements as repairs or maintenance to get an instant claim, but this is against tax laws and could put investors under a harsh scrutiny by the tax office.

Still, there are instances that allows investors to immediately deduct their expenses for particular improvements.

"Immediate deductions are available to certain assets that cost less than $300,” Mr Beer said.

“For example, a ceiling fan worth $290 can be immediately deducted in the financial year of purchase.”

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