Claim deductions on outdoor structures and save tax

When it comes to claiming depreciation on investment properties, many investors are unaware of the deductions available on outdoor structures, fixtures and fittings.

Items outside a building can add value to a property. Rather than ignoring the street appeal, investors can include items in the yard or outdoor area to help attract potential tenants. The investor can then maximise their deductions by claiming depreciation on the eligible items in the front yard, backyard and balconies of their properties.

Deductions can be claimed on these outdoor assets as either capital works allowance or plant and equipment depreciation.

Capital works allowance, also known as building write-off, is based on the historical cost of a structure, excluding the cost of plant and non-eligible items. Outdoor structures which qualify for the capital works allowance include:

Outdoor Item

Approximate Cost

1st Full Year Deduction

Retaining wall

$10,000

$250

Fencing

$5,000

$125

Sleepers

$3,000

$75

Concrete slabs

$6,000

$150

Patio

$4,520

$113

Clothes line

$400

$10

In-ground pool

$45,000

$1,125

Above ground pool

$20,000

$500

Plant and equipment items, including removable or mechanical assets, are also eligible for depreciation deductions. Each plant and equipment item has an effective life set by the Australian Taxation Office. The depreciation available on each item is calculated using the effective life. Some depreciable outdoor plant and equipment items commonly found outside a property include:

Outdoor Item

Approximate Cost

1st Full Year Deduction

Outdoor furniture

$4,000

$1,600

Garden shed

$950

$178

Garden hose

$80

$80

Solar lights

$250

$250

Pool filters & pumps

$3,000

$750

Garden watering system

$800

$150

*This example uses the diminishing value method of depreciation;

it utilises the low-value pool and immediate write-off.

Assets outside a property can be worth thousands of dollars. Investors should take special notice when old assets including retaining walls, garden sheds and driveways are removed and replaced during a renovation. They may be entitled to claim 100% of the unclaimed value as a deduction. A specialist quantity surveyor is qualified to calculate values and construction costs of these items and can ensure that investors are not throwing dollars away!

SOURCE: BMT & Associates, Quantity Surveyors