During the summer months, owners often think about the work that needs to be done in the yards of their investment properties. Work done in the yard of an investment property not only helps to boost the street appeal and attract potential tenants, but can also possibly increase the rental value of the property and the depreciation benefits. Brad Beer from BMT Tax Depreciation explains what a property investor should be aware of when doing any renovations to the yard in an investment property.
Kevin: Well, during the summer months, owners quite often think about the work that needs to be done in the yards of their investment properties. Work done in the yard of an investment property not only helps to boost the street appeal and attract potential tenants, it can also possibly increase the rental value of the property and the depreciation benefits.
So what should a property investor be aware of when their doing any renovations to the yard of an investment property? To answer some of our questions, Brad Beer from BMT Tax Depreciation joins us.
Hi, Brad. Thanks for your time.
Brad: Hi, Kevin. Great to be here.
Kevin: I wonder if starting off, if you can just give us some examples of outdoor structures that do qualify for the capital works allowance?
Brad: Well, Kevin, basically whenever you do any sort of work in the yard, most things are going to have some sort of deductions. Any retaining walls or hard landscaping, pretty much any money you spend on structural type things will have some Division 43 allowance available.
Kevin: Can you give us some examples of the plant and equipment items in the yard that can also attract depreciation deductions?
Brad: Yes, definitely. An interesting one is a garden shed is seen as a removable structure.
Brad: Not the concrete slab; that would be Division 43. But the actual garden shed is a plant and equipment item. Watering systems and things that are mechanical that you add to the yard in any way. If you’re doing pools, things like pool pumps, anything that you add that’s kind of mechanical in nature is probably going to be plant and equipment.
Kevin: Just on another point now, if I were to remove something from the yard or throw it out, is it best to contact a quantity surveyor before I actually do that?
Brad: The yard is no different than the rest of the house in that respect, Kevin. Anything that you’re throwing away, if there has been any value in relation to that item claimable as either plant or Division 43, whatever is left is an instant potential reduction in that year that you throw it away. So before you throw it away, make sure it’s been depreciated over the time and you get to make that deduction instantly for whatever value is actually left.
Kevin: Yes, another good reason to contact BMT if you’re going to be doing anything like that.
Mate, another question I’m commonly asked is does the depreciation schedule have to be updated any time any new items are added to the yard?
Brad: The important thing is to get it done before you rip things apart because, firstly, you want those deductions, and secondly, if you do rip it apart, you have evidence of what was there.
Now afterwards, with very simple things, sometimes the accountant can make an update or we’ll make an update. So it’s best to contact, have a discussion. You have some of the costs. We can easily add them in afterwards. If it’s just one thing, it could be the accountant just does it, but if it’s a few, talk to us and we’ll update the schedule very easily.
Kevin: On our website, Real Estate Talk, there’s a special area for BMT Tax Depreciation. You can contact them there; just click on the button.
Mate, just before I let you go, I just want to ask about everyday repairs in maintenance to, say, items in the yard. Can that affect the depreciation deductions?
Brad: It’s the same with across the property. If it’s a repair, then it should be claimable straight away. Maintenance, like mowing the yard and things like that, you’d expect to be instantly deductible. When you actually make improvements, then those things need to be depreciated instead.
So if you repair a fence with a couple of palings, that should be instant deductions. But if you replace the fence with a new one, then it’s probably going to be a capital improvement that needs to be depreciated over time.
Kevin: It’s so easy to see why so many investors miss out on the opportunities with depreciation, because it is a complex area and very easily overlooked. That’s why we always recommend you contact our friends at BMT Tax Depreciation. They will put you on the right track.
Once again, Brad, thank you so much for your time, mate.
Brad: Thanks, Kevin. Always a pleasure.