Updated: October 2023
Claiming tax deductions for retaining walls
What is the Tax Deduction Rate for Retaining Walls?
The depreciation rate for retaining walls is typically 2.5% per annum.
So a $20,000 retaining wall can be depreciated at $500 per year, until the wall is 40-years old.
The ATO has designated retaining walls to Division 43 within the ITAA 1997 ruling. This means retaining walls fall into the Capital Works category and claimable at 2.5%pa until the retaining wall is 40 years old.
How to claim instant tax write-off for yuor retaining wall
Should you need to replace the retaining wall before it’s effective life of 40-years is reached, you can usually claim the residule value as an instant write-off on your tax return. But you do have to replace the wall the right way. I’ll cover that further down.
Types of tax deductible retaining walls
There are many types of retaining walls, but the most common types found in Australian investment properties are as follows:
- Timber Sleeper
- Concrete Sleeper
- Rock Boulder
- Rendered Blockwork
Timber Sleeper Retaining Walls
Timber retaining walls are typically made of treated hardwood, though sometimes I see treated pine sleepers in use. There’s no difference in the effective life or rate of depreciation between the two timber types, But pine timbers can be cheaper to buy and install.
A great aspect about timber retaining walls is that they’re easy to repair one section at a time. Where a timber wall can have one board relatively easily removed and replaced, another wall solution such as rendered block can be very difficult and expensive.
Timber sleepers are also commonly used to create garden bed edges and raised gardens. Both of which are claimable at tax deductions in your rental property.
Concrete Sleeper Retaining Walls
Concrete sleeper retaining walls are a great long term solution for landscaping projects that require a wall that is both attractive and durable.
Concrete sleepers are more expensive to buy and install than the timber equivalent.
Mostly due to the additional costs associated with the manufacture and labour to install.
Life of a concrete sleeper retaining wall
The ATO specifies the life of a concrete sleeper retaining wall to be 40 years. This does not mean it will actually last 40-years, but does limit the annual deductions to just 2.5% (of the original fully installed price) per annum.
Boulder Retaining Wall
Rock boulder retaining walls are a generally the cheapest option per metre of wall.
The rock is cheap to buy. Cheap to deliver and cheap to install.
Plus it lasts forever. The boulder rocks you install are possibly millions of years old, so they’re not going anywhere quickly.
This is not the case for timber or man made products.
The downside of boulder rock walls is that sometimes they’re not eligible for any tax deductions at all.
That’s because in certain circumstances they can be classified as earthworks. And the ATO says earthworks is not a claimable tax deduction.
But I can help you navigate through that legislation if needed
Rendered Blockwork Retaining Walls
Rendered blockwork retaining walls are a high-end solution to retaining soil – and therefore, very expensive. The ATO has assigned a 40-year life to rendered blockwork walls. Although rendered block retaining walls are expensive to install, they do have long lives and low maintenance costs. This helps with the overall lifetime costings.
How to claim retaining wall repairs as tax deductions
When carrying out repairs to your existing retaining wall, you may be able to claim the costs as an instant write-off under the ATO’s repairs and maintenance category.
However, you must go about it the right way. Otherwise, the taxman may decide you don’t qualify for the 100% tax deduction and force you to claim at just 2.5% per annum.
Here’s how to do it
Firstly, you must ensure you are replacing only what needs replacing.
-Replacing an entire retaining wall system just because one section is failing is not reason enough to justify the entire cost as a repairs and maintenance item.
Instead, replace only what is needed at the time.
Secondly, replace your wall with the same material type.
-by that I mean; replacing timber with timber, concrete with concrete, brick with brick… And so on.
This will ensure your costs are consistent with the ATO wording around what qualifies as repairs and maintenance works and not capital improvements.
What to do next
If you have an investment property with retaining walls there are undoubtedly tax deductions available to you. All you need do is speak to your preferred quantity surveyor or a good accountant for personalised advice.
To do this, simply get in touch with us and I’ll personally look over your property via my computer and give you an eyeball estimate of deductions.
In the meantime, you may find value in reading my other articles or checking out the real world results my clients have been getting with their tax depreciation schedules.
Another good resource for you is my tax depreciation HQ page where you’ll find even more information regarding how to save tax on your investment property.
This article was written by William Callaghan A.A.I.Q.S.
2nd generation Quantity Surveyor and founder of WRC Quantity Surveying
