The ATO rewards you for making houses into homes for your renters.
Being a property owner comes with risks, but also reaps rewards. I’m not just talking holiday gift certificates and bottles of wine from your tenants. You can actually claim a tax deduction for the maintenance and care you put into your property that you work so hard on.
The Australian Tax Office offers property investors the capital works tax deduction to claim. Think of this as a reward for all the blood, sweat and tears you put into your investment. Now, let’s see how much it’s worth, how to claim it, and what it applies to.
What is a capital works deduction?
The capital works deduction, aka the “building allowance”, are one and the same. Whatever you’d prefer to call it, it’s applied to your tax return as a deduction, as well as a reduction of the cost basis on the property or building in question. It will offset the cost of any construction you’ve done that assists with bringing in rental income.
Updates to your property that could apply to this tax deduction include, but aren’t limited to:
- Building expansions
- Building alterations
- Concrete and brickwork
- Property items (excluding equipment and plant, meaning certain utility items)
- Sealed driveways
- Retaining walls
- Other structural improvements