Rental Properties and Capital Works Deductions

Did you know one of the biggest tax deductions that can be claimed on your rental property tax return, behind loan interest, is something called the “Capital Works Deduction”?

Essentially this deduction is for the decline in value of income-producing buildings or extensions, alterations or improvements. It also includes sealed driveways, fences and retaining walls. The deduction is claimed at the rate of 2.5% per year for residential premises and requires a Quantity Surveyor report to determine the building costs at the time of construction. The building must have been constructed after 17 July 1985 to be eligible for the capital works deduction on residential rental properties.

In most cases the deduction is upwards of $2,000 per year, resulting in an average $500 to $1,000 increase in your tax refund depending on your marginal tax rate.

To learn more about this tax concession and other investment property advice, please contact us on (07) 3446 5906 or via email.