Hi,
my husband and I are still learning about investing and we’re not sure if there’s any tax deduction for putting a new kitchen in out investment property.
[withstupid]Hi Trish
Welcome to the forum. There is no ‘tax deduction’ as such for your kitchen, because Kitchens are now considered part of the building.
Buuut, there will be depreciation (at a massive 2.5%) available on the cost of it…
Cheers
MelJust my 2c worth…..
True, there may not be any tax deductions for the “new kitchen” HOWEVER….if the current cooktop or wall oven (for instance) was totally cactus and the tenants were unable to cook on/in same, this could be viewed as necessary repair/replacement. Or has the tax depts views on this changed since I last looked????? [rolleyesanim]
Cheers,Jo
Jo, I think the call needs to go out to Scott (aka depreciator) on this one….[
]Cheers
MelFair enough Mel; I will keep my ears (eyes) glued [blink] I’d like to know the answer on this myself!!!!
Cheers,
Jo
Hi Jo,
New stove would be classified as replacement and would be depreciated – (well it was 8 years ago when our hot water system died) – if however repairs could be effected then the repair bill and parts would be deductible.
Derek
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Hi all,
Derek is of course right. My accountant advised me similarly when I replaced a hot water heater some years ago. But there may be some room to move.
If the current cooktop (or whatever) was beyond repair and had to be replaced, you could possibly argue that it is a repair. If you go down this road, the safest course of action would be to replace the cactus stove with a stove of a similar age and model i.e. visit a second hand shop.
The most important thing to remember is that you must not ‘improve’ the asset. By that I mean if you toss out that 10 year old upright St George cooker and replace it with a slick 900 wide Smeg cooktop and under bench over, then you have made a ‘capital improvement’ and as such you’d definitely need to depreciate it.
Yeah, I know there’s a huge grey area between those two scenarios. Common sense is the key. And always get an opinion from your accountant.
Remember also, if you opt to chuck out a functioning stove and upgrade, that stove you are chucking out has undeducted depreciation that can be claimed. If you’ve been depreciating it using the Prime Cost method (which hardly anyone does) you can claim 100% of the undepreciated portion when you dispose of the asset. If you’ve been using the Diminishing Value method, the original stove would stay in the Low Value Pool and keep depreciating. So yes, you’d have 2 stoves being depreciated simultaneously.
Scott
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