5 Hot tips on how to renovate your investment property – properly.
If you are renovating your investment property, make sure you get the most out of your hard toil. There are some simple choices according to MCG Quantity Surveyors, that can boost your bank balance without any extra work.
Mike Mortlock, managing director of MCG Quantity Surveyors, said many renovators don’t realise their choices of fixtures, fittings and materials will ultimately affect the size of their annual tax return. “Most renovators try and save money by tackling DIY work, but there are smarter ways to increase your result without additional hard labour,” he said.
Tip 1: Kitchens not bathrooms
Choosing to spend more in the cooking area will improve your tax outcome, according to Mr Mortlock.
“Kitchen renovations attract higher depreciation rates than bathrooms because of the sheer quantity of assets defined as plant and equipment items – the very things that depreciate fastest under the ATO (Australian Taxation Office) guidelines.”
Mr Mortlock said all kitchen appliances are plant and equipment, whereas within the bathroom space, there’s limited similar items, like bathroom accessories and exhaust fans.
Tip 2: Carpet not tile
Mr Mortlock said some floor finishes have greater tax advantages than others. “My tip for getting dollars back is to pick floating timber or carpet, rather than tile or polished concrete.”
He said in the eyes of the ATO, carpet has a 10-year effective life and floating timber has a 15-year horizon, while tile and concrete are both classified as lasting 40 years.
Tip 3: Small fixtures
Mr Mortlock said individual plant items with an opening value under $301 provide an instant deduction on your tax return.
“If, for example, you’re considering cost-effective approaches to cooling rooms, ceiling fans could be the way to go. If you have one installed for $300 or less, you’ll get a $300 deduction right away.”
Tip 4: Outdoor areas
Upgrading outdoor spaces provides the perfect opportunity to increase your tax return, said Mr Mortlock.
“You might consider making your rental more inviting by including a few little outdoor extras that provide great advantages for maximising rebates. External fridges and barbecues, for example, help improve rental appeal while also providing excellent short-term tax deductions.
Tip 5: Windows
Mr Mortlock said one of the most cost-effective ways to boost a property’s value and take advantage of depreciation is to include window coverings.
“They help with temperature control and filtering light, while also completing the property’s fresh, new look – and they’re a terrific tax deduction too.”