Does Your Accountant Claim Scrapping after Renovation?

Scrapping is another benefit that comes from a renovation of your investment property. The removal and disposal of any potentially depreciable works of assets from an investment property can unlock additional deductions. The scrap[ping value is essentially the unclaimed or undeducted depreciable value of an asset at the time of removal and is calculated as follows:

SCRAPPING VALUE = ORIGINAL DEPRECIABLE VALUE MINUS DEDUCTED VALUE TO DATE.

In the case of a kitchen renovation, prior works like bathroom tiles, vanity, bath kitchen bench tops and cabinets are some of the elements that will have residual value that can be ‘scrapped’ and the owners may be entitle to claim the leftover amount in the year they are removed.

The increase in the rental income and value of the investment property after renovations, as well as the depreciation deductions and the scrapping allowance that can be claimed on the back of the renovations and improvements, illustrate the financial benefits of renovating an investment property.

Access to the ‘scrapping allowance’ highlights the importance of having a quality quantity surveyors report to hand to make the depreciation schedule is compiled to maximise the tax deductions for the property owner.