I arrived at a client’s premises to meet him standing there with a jackhammer in his hand ready to replace the drive, it was his first investment property and he thought that replacing the drive would induce tenants. Inside they were a typical 1964 build with lounge/kitchen, one bedroom and separate toilet and shower.

I pulled out my ipad and showed him that for the same cost, he could replace the carpet in the lounge and bedroom, vinyl in the kitchen, fit two ceiling fans and replace the stove (in each of the four units).

Description Cost % depreciation First Year claim
Concrete Drive $8,900 2.5% $222.50
TOTAL $8,900 – $222.50
Description Cost % depreciation First Year claim
Carpet $3,200 20% $640
Vinyl $1,120 20% $224
Ceiling Fans $1,760 100% $1,760
Stove $2,160 18.75 $405
TOTAL $8,240 – $3,029

As a tenant what would you rather have? As you can see from the above example on a post purchase expenditure of $8,900 on the drive you get an annual deduction of $222.50 for the next 40 years or on plant purchase of $8,240 your first year deduction is $3,029.  It’s important when purchasing an investment property to remember that it’s a small business and before altering or adding anything please speak with your property manager or one of Property Returns’ expert quantity surveyors in Melbourne who can advise you of the best outcome.

a blog written by, James Hannah Tax Depreciation Specialist.