A kitchen renovation usually contains several different types of costs.
Some parts may be treated as capital works. Other parts may be depreciating assets.
Kitchen renovation items may include:
- Cabinetry
- Benchtops
- Tiling
- Plumbing works
- Electrical works
- Appliances
- Rangehood
- Cooktop
- Oven
- Dishwasher
- Lighting
- Flooring
- Splashback
- Fixtures and fittings
The correct treatment depends on the nature of each item.For example, built-in structural works may be treated differently from removable appliances. A depreciation schedule can separate the renovation into categories your accountant can use.
Timing is also important. If the property is being renovated before it is rented, some costs may not be immediately deductible as repairs. They may need to be treated as capital improvements and claimed over time.
If the kitchen replaces an old kitchen in an existing rental, there may also be a scrapping opportunity for removed assets, depending on the records available and the tax treatment.
Koste.ai can help investors understand what information is needed after completing a kitchen renovation.
Frequently Asked Questions
Can I claim a new kitchen immediately as a deduction?
Generally no. A new kitchen is usually treated as a capital improvement. Different parts of the renovation may be claimed as depreciating assets or capital works over time.
What kitchen items are depreciating assets?
Removable items such as ovens, cooktops, rangehoods, dishwashers and refrigerators are generally treated as plant and equipment and depreciated over their effective life.
What kitchen costs are treated as capital works?
Built-in structural elements such as cabinetry, benchtops, tiling, plumbing works and electrical works are generally treated as capital works under Division 43.
Is there a scrapping opportunity when replacing a kitchen?
Yes. If the old kitchen contained assets with remaining written-down value, there may be a scrapping deduction available when those items are removed.
Do I need to keep the kitchen renovation invoice?
Yes. The invoice is important for supporting the depreciation claim. A quantity surveyor may also be needed to break down the costs into appropriate tax categories.
Written by Koste Team · Koste Chartered Quantity Surveyors · AIQS Member · RICS Member · TPB Registered · 1300 669 400 · info@koste.ai