Tax Deductions for Biocycle Systems

Investment Property Biocycle Systems

Can you claim deductions for biocycle systems?

Yes you can claim deductions for biocycle systems.
You just need to know how – and when. But I can help with that.

When to claim biocycle tax deductions

The best time to claim tax deductions for your biocycle system depends on the expense type. But ideally, you’ll incur the expense just before end of financial year.

That’s because expenses fall into different deduction categories, as determined by the Australian Taxation Office (ATO), and the different categories get to claim the deductions at faster or slower rates depending on the item.

In short, expenses fall into 4 categories

How to claim biocycle system tax deductions

Capital Works Deductions

For capital works (division 43) deductions, it’s best to have your preferred quantity surveyor enter the costs into your tax depreciation schedule.
Here, the capital works outlays will be deducted at 2.5% per annum, each year you rent out your investment property.

Capital Works Deductions Example

A new, inground concrete biocycle tank may cost $15,000 fully installed. This $15,000 is claimable at 2.5% pa. Giving you $375/year in tax deductions for the next 40-years.

Repairs and Maintenance Deductions

Biocycle systems are great, but they do require repairs and maintenance – every year.

My own biocycle system gets serviced 4 times per year. This costs me around $50 per service which is fully tax deductible at 100% instant write off, as it’s a maintenance item.
Should the service tech ever need to replace any parts – even if they cost several thousand dollars – these are also claimed at 100% write off as repairs under the ATO rules.

Low Value Pooling Deductions

Low value pooling items, such as smaller pumping equipment and accessories are claimed as tax deductions at a much faster rate than the capital works items.
Individual items equal to or under $300 are instant write-offs and claimed as a 100% tax deduction in the financial year the expense occurred.
Whereas, Items greater than $300 but less than $1,000 can be claimed at 18.75% in the first year and 37.5% each year thereafter.

Tip: it’s particularly good to have these expenses in the last few days of June – so as to minimise the number of days you are on the 18.75% rate.

Diminishing Value Deductions

Division 40 category items get claimed faster than Division 43.

This is typically where your pumping equipment is claimed as a deduction at a higher rate per year and over a shorter period of time.
That’s because the pumps have a much shorter effective life than the concrete or poly biocycle tanks.
Typically, a pumping system will cost $3,000 and can be claimed at 10% pa with the Prime Cost Method or as much as 20% per annum with the Diminishing Value method.

Can you claim the pumping out of a biocycle system as a tax deduction?

Yes, you definitely can claim the biocycle pumping costs as a tax deduction on your investment property.

Pumping and water treatment is also considered a maintenance expense and therefore claimable at 100% instant write off.

Types of biocycle tanks and their tax deductions

There are two Main types of biocycle tanks commonly found in Australian investment properties;

  • 1. Poly
  • 2. Concrete

Both are claimable as tax deductions – so long as the tanks are newer than February 26, 1992.

Can you claim the demolition of a biocycle system as a tax deduction?

Yes, if you have a bicycle system newer than February 26, 1992 as part of your investment property and you need to demolish it, then you can claim the residual value of the system as an instant asset write off.

This is known as a scrapping schedule.

tax deductions for water disposal area

If your investment property has a Land Application Area (LAA) that requires maintenance, and you (the landlord) are tasked with this job, then you can claim the costs incurred as tax deductions.
For example, you need to mow the land application area, you can claim a the Mowerman’s fee as a maintenance cost, claimable at 100% instant write off.

For more information on the tax depreciation entitlements within your investment property, feel free to contact us or do some further reading on our page dedicated tax depreciation for investors.

Want to see some real world results

The best place to see what other investors are getting in tax depreciation deductions for properties similar to yours is by visiting our client portfolio page here

For further reading on more of our quantity surveyor articles click here

Or to visit our home page for Brisbane tax depreciation services click here

published: September 2023

This article was written by William Callaghan A.A.I.Q.S.
2nd generation Quantity Surveyor and founder of WRC Quantity Surveying