Any residential building where construction commenced after the 15th of September 1987 will entitle their owner to capital work deductions at a rate of 2.5% for up to 40 years. However, residential buildings prior to 1987 are not eligible for building write-offs. That is if the residential building has stood untouched for all those years. In most cases buildings of substantial age will have undergone some form of renovations, unlocking deductions for their owner. Some renovations would be so extensive that the property can be classified as new.
Capital works improvements give life to plant and equipment assets, which are revalued based on a QS’ assessment of their future use. In the instance that a property investor is unable to claim Division 40 plant and equipment, they should be able to claim a capital loss for the decline in value of the assets. If you would like to know more about this, read our previous blog post, Capital Gains Tax- Capital Loss and Equipment Depreciation Schedules for more information.
Regardless of the age of the buildings, it is highly recommended to engage a Quantity Surveyor (QS) for advice concerning the potential deductions. For an older property, the deductions won’t be as high as for a new one, but more often than not, the deductions will be worthwhile. In addition, professional fees are tax-deductible to the full amount, leaving no reason not to hire a QS.