Can You Claim Tax Deductions for Kitchen Renovations
Kitchens cost a fortune. And don’t last forever. The are infact one of the most expensive elements in every property. Yet I’ve seen many clients replace kitchens as soon as 10-years. Sometimes even earlier
But when it comes to investment properties at least you can claim the costs as tax deductions
Here’s everything you need to know about claiming tax deductions on your investment property kitchen renovation.
Capital Works Deductions
Firstly, the ATO considers a kitchen to be a capital works item. Claimable under division 43 within the taxation legislation.
Capital works items are deductible at 2.5% pa over a 40-year life.
So a $20,000 kitchen can be deducted in your yearly tax return at $500/year.
Tax Deductions on Kitchen Appliances
When you install a new kitchen you almost always install new appliances too.
And they can be deducted too.
Even better. They can be claimed at much higher rates than the cabinetry. That’s because the ATO considers appliances to be “plant and equipment” aka Division 40 items.
Tax deductions rates vary depending on the item and the fully installed cost but generally it goes like this:
- Items under $300 can be claimed as an instant write-off at 100%
- Items $301-$1,000 can be claimed at 18.75% pa in the first financial year, then, 37.5% pa each year thereafter in the Low Value Pool
- Items over $1,000 (typically ovens and dishwashers) can be claimed at various rates starting from 16.66% pa in the Diminishing Value schedule
Scrapping Schedule for discarded items
The ATO says a kitchen has a life of 40-years. So, pulling out that kitchen before it’s 40th birthday means it still had some life (value) left in it.
And that means instant asset write-off for you!
Let’s say you have a 15-year old kitchen that cost $15,000 to install. But you’ve decided to rip it out and replace it with a new kitchen for your tenants.
So at 15 years of age, it still had 25yrs of life left.
Or $9,375 of deductions (25 x $15,000 x 2.5%).
That $9,375 can be claimed as an instant write-off in the scrapping schedule we provide. The deduction can be claimed in the financial year the expense occurred.
This is great news for you!
Repairs and Maintenance Deductions
Not every kitchen gets gutted and thrown in the skip bin. Many get makeovers. Minor renovations to the cupboards, benchtops and door hardware.
When carrying out minor renovations you may be able to claim this as an instant asset write-off under the “repairs and maintenance” category.
Say you have a 7-year old kitchen with a few bricks doors and busted hinges.
You can safely replace those doors and hinges and give the cupboard faces a paint job and claim it all as an instant tax write-off.
But if you’re unsure about the extent of works you’ve carried out, simply get in touch with us to find out exactly what you can claim. And how soon you can claim it.
Added Rental Value
Everyone likes a new kitchen. Especially tenants. So a new kitchen in your rental property could easily add extra rental income to your investment.
Just $15 more per week would net you another $780/year in rent. This can make a huge differnece. Especially if you’re a first time investment property owner.
Knowing all this can be tricky and complicated…
It takes a trusted quantity surveyor to ensure your tax deductions are maximised so be well informed when choosing the right QS to inspect your property.
Yet, my team and I at WRC Quantity Surveying will always be able to point you in the right direction and ensure your tax deductions are fully maximised to be the most tax advantageous they can be
To find out more or to get your free quote, simply get in touch with us here and we will get back to you within 24-hrs (usually within 2-hrs)
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