CAPITAL WORKS DEDUCTIONS ...contd

Capital works deductions are something like this:

Original structure and fixed items 2.50% - capital works rate, 25 - remaining effective life (years), $6,250 would be the first full financial year deductions, $31,250 five year cumulative deductions.

Kitchen cupboards (replaced 5 years ago) 2.50% capital works rate, 35 remaining effective life (years), $289 first full financial year deduction, $1,445 five year cumulative deductions.

Kitchen bench top (replaced 5 years ago) 2.50% capital works rate, 35 remaining effective life (years), $360 five cumulative deductions.

Outdoor pergola (installed 7 years ago) 2.50% capital works rate, 33 remaining effective year deduction, $240 first full financial year deduction, $1,200 five year cumulative deductions.

Plumbing (updated 5 years ago) 2.50% capital works rate, 35 remaining effective life (years) $340 five year cumulative deductions.

Tiling (updated 5 years ago) 2.50% capital works rate, 35 remaining effective life (years) $130 first full financial year deduction, $650 five year cumulative deductions.

Total first full financial year deductions = $ 7,049
Total five year cumulative deductions  = $35,245


For affected investors, it's important to note that the changes only impact the existing plant and equipment depreciation deductions found within a second-hand residential property. These are the easily removable fixtures and fittings such as carpets, hot water systems and air conditioners. Any brand-new plant and equipment assets added to the property after purchase are depreciable.

The capital works allowance, which is the component investors can deduct for the building structure, is unchanged. Examples include walls, the roof, doors, kitchen, cupboards and more. These deductions can be claimed at a rate of 2.5% per year for a maximum of forty years for any property in which construction commenced after the 15th of September 1987.

Often older properties have been renovated and qualifying capital works completed by a previous owner can be claimed by the new owner for any years that remain in the forty year period.

See capital deductions above.

In this scenario the investor exchanged contracts on a fifteen year old, four bedroom, two bathroom house after 7.30pm on the 9th of May 2017.  The previous owner of the property had completed renovations which included updating the kitchen through installing new cupboards and bench tops five years ago and adding an outdoor pergola seven years ago.

As the example shows, the investor would be eligible to claim $7,049 in capital works deductions in the first full financial year, or $35,245 in cumulative deductions over the five years.

The investor would also be eligible to claim depreciation for any brand-new plant and equipment assets they chose to purchase and add to the property themselves.

Any plant and equipment assets that were installed by the previous owner can be excluded from the depreciation schedule and included in a capital loss schedule.  This schedule can be used by the owner to offset any Capital gains Tax liabilities should they choose to dispose of any assets or sell the property in the future.

There are still substantial deductions available for any investors affected by the new legislation. It's always worthwhile consulting with a Quantity Surveyor to discuss what deductions can be claimed.
(Contact BMT Tax Depreciation Quantity Surveyors visit their website bmtqs.com.au)

Thanks to BMT for their articles which I find very informative to our investors) 

MAKE YOUR OWN DECISIONS AND GIVE IT A REAL GO!!

SELLING MOSMAN PARK & THE WESTERN SUBURBS!!

KEEPING IT REAL IS OUR MOTTO!!