April 2026
It takes planning to reduce your tax.
And now is the time to do some – don’t wait till June when everyone is busy.
Now is the time to talk to your accountant if you have one and ask them whether there is anything you can do over the next few months.
Now is the time to get your rental property ducks in a row and perhaps do some work you have been putting off.
Now is of course the time to order a new Depreciation Schedule if you have a new investment property.
Repairs vs improvements is the thing that trips lots of people up every year, so we’ll have a look at that.
And the perils of taking advice from unqualified people. Have you heard about finfluencers?
We’ll also look at an interesting claim we helped someone with for ‘disposal of Capital Works’. They are some useful learnings in it for all investors.
Do you have a question about claiming depreciation for a new investment property, or how to treat a repair? Make an enquiry here or call us on 1300660033.
Key Points
- 1. Changes you make to a property to prepare it for rental are called initial repairs. These are considered improvements by the ATO and must be depreciated.
- 2. Be wary of who you take advice from around tax season. Check anything you hear from ‘finfluencers’ with your accountant before you take any action.
- 3. A ‘scrapping schedule’ is a catchy name of a report that allows for the possibility of claiming an immediate deduction for Capital Works that has been disposed of.
- 4. Share your depreciation know how (and this email) with a friend who might like to learn more about depreciation.
What are initial repairs?
We recently had a client who thought he had found a clever way around the ‘initial repairs’ scenario. Alas, it was not to be.
Backing up a step, the ATO’s definition of repairs is to deal with problems that have arisen in a property while YOU were renting it out. These works can of course be expensed i.e. claimed at 100% in the year the work was done.
Any existing problems that you deal with when you get the keys to a newly purchased rental property are called ‘initial repairs’. That’s an ATO term. It means you have ‘improved’ (another word they like to use) the property relative to the condition it was in when you bought it.
We bang on about this often, most recently here, because it is by far the most common question we are asked.
Now, back to that client.
They had bought a property with a tenant in situ and elected to leave them there till the lease ran out. When that happened, they took the opportunity to do a fair bit of work to the property: full internal repaint, shower screen repair, ceiling replacement in one room (consequence of a long ago water leak), floor polish and a kitchen bench replacement.
They were chuffed when they told us they believed none of this constituted initial repairs because they had been renting out the property for some months.
They were crest fallen when we told them they were wrong.
Before breaking the news to them, we had a look at the photos online from when they purchased the property. All the damage they dealt with was visible then. A lot of people don’t realise that when the ATO decides to look closely at something, they will often do exactly what we did.
Be wary of Finfluencers…
Yes, it really is a thing.
‘Finfluencers’ (or Financial Influencers) are people on social media who spruik financial or investment advice. They’re everywhere now: YouTube, Instagram, FaceBook, TikTok and a bunch of platforms you (and we) have probably never heard of.
Some really do provide good advice and help people, often younger people, understand some complex things. Remember, there is a whole generation, perhaps more than one, that gets their information on everything from these sources.
Then there are the Finfluencers who are sometimes paid to promote risky products.
They’re the online equivalent of the spruikers who used to run free investment seminars and fill rooms with people on a weekday evening. They were as slick as the people now online and were often also spruiking questionable strategies and flogging dodgy investments.
ASIC do their best, but it was easier in the old days to shut down an operator running physical seminars. It’s not so easy in this online world.
One of the people who has straddled the old school and the online worlds is someone the Sydney Morning Herald describes as ‘Australia’s most persistent scammer’. Every investor should read this story here. If you don’t subscribe to the SMH, you can also read more here.
It’s always a good idea to run things past someone who knows you and your situation. Someone who has been around and probably ‘seen it all’. Someone like, say, an accountant.
Most of our work comes from accountants. If you have an investment property, it would be wise to also have an accountant. Let us know if you would like us to recommend one for you.
Disposal of Capital Works and “Scrapping Schedules”
We get the occasional client asking us about a ‘scrapping schedule’. It’s a catchy name, one we wish we had thought of, but it’s just a bit of marketing spin.
The ATO refer to this opportunity as ‘Disposal of Capital Works’.
In a nutshell, it refers to the possibility of claiming an immediate deduction for Capital Works (building stuff) that has been disposed of. Naturally there are a few qualifiers and we have written about this previously here.
Recently, we had a client with a commercial property they had owned for a couple of years and recently put a new roof on.
They came to us because they thought there might have been some residual value in the old roof they had disposed of. There was.
A lot.
It was an 800 square metre factory and Google Earth told us it was built in 2004 – it can be such a useful tool for finding the construction dates of commercial properties.
We could see the original build, and then some years (and photos) later we could see a large part of the roof had been replaced. Google also had a story on the fire that necessitated that.
The original section of roof, when replaced, had 20 years of value left in it. The newer section had over 30 years of value left in it. The total written-down value of the roof that was disposed of was $56,417.
That $56,417 will be claimed as a deduction by the client.
Not many people know about opportunities like that, which is a terrible, and costly, shame. It’s good that this was an informed client – they had probably been avid readers of our occasional emails.
Depreciation Know-How
If you’re keen to learn more about Depreciation and Depreciation Schedules, head to our website to learn more here. And if you have a friend who would benefit from learning more, share this email with them.
Do you have a residential or commercial property you would like us to help you claim depreciation for? Or a question about depreciation?
Order online now or call us on 1300 660 033 and rely on our 20-plus years of experience in estimating depreciation returns.
