Time is running out on a unique opportunity for residential landlords, says Alun Hassall of Koller & Hassall.
The low-value asset threshold for depreciation of capital improvements will remain at $5,000 only until 16 March 2021, when it drops to only $1,000.
The Healthy Homes Standards mean that many landlords will soon need to install heat pumps, pellet fires, extractor fans, new insulation, windows, and skylights in their rental properties.
If they do this before 16 March 2021 (and assuming the cost is less than $5,000) then landlords will get an immediate expense claim for tax purposes.
After 16 March 2021 (and assuming the cost is more than $1,000) the cost will need to be capitalised as an improvement to the property. For some improvements, like a heat pump, these can be depreciated over a number of years. Other improvements become part of the building itself and no depreciation is claimable.
Residential landlords need to act now, first to get a Healthy Homes assessment and second to get the needed work underway.
Make sure that you keep copies of quotes and invoices from your suppliers to prove that the expense was incurred prior to 16 March 2021, says Alun Hassall. I always recommend that landlords use a qualified accountant to prepare their tax returns. The tax laws for rental properties are always changing – Brightline rules, Ring-fencing rules and now the low value asset threshold change. A professional accountant will stay up to date with all these changes so that landlords can be assured that their tax returns are prepared correctly.
Please do not hesitate to give our offices a call if you have any queries regarding this rental property opportunity.