Key tax considerations for your investment property

“What’s their long-term intent? What do they want this to be? They need to seek professionally advice so they can then make sure that they’re handling their expenses and their profits appropriately,” she said.

“The Tax Office [has] very clear guidelines around the type of category you fall into as a renovator, and lot of it is around intent and also around structure. And they’re very clear about it.

“They now have some great information pieces available around it, and depending on which one of those categories you actually fall into will very clearly then determine for you how you process your expenses, how you process your GST and how you process your profit at the end.”

What's worth considering? 

According to Mike Mortlock, managing director of MCG Quality Surveyors, choosing to renovate kitchens, carpets and timber, small fixtures outdoor areas and window coverings are the big-ticket items to renovate can be favourable from a tax perspective. 

“I’ve run scenarios which show investors can create added thousands in tax deductions on a renovation simply by selecting one item or finish over another,” Mr Mortlock said.

Other items to consider to add to a property during a renovation that create value through tax deductions over time, according to Bradley Beer, CEO of BMT Tax Depreciation, include split system and standalone air conditioners, blinds, ovens, hot water systems, dishwashers and cooktops.

With tax depreciation laws changed last year, Mr Beer said it was important to consult with advisers and specialist quantity surveyors to determine whether they can make the right claims on specific items.

“In a toughening real estate market, investors would be wise to ensure they are legitimately maximising their claims,” Mr Beer said.

What is allowed? 

For a comprehensive summary of allowable deductions, and for guidance in making sure your claims comply with the law, visit the ATO's website.