Scrapping is often relevant when an investor renovates or replaces part of a property.
If an eligible asset is removed before the end of its effective life, there may be a remaining tax value that can be written off. This is often called a scrapping deduction or balancing adjustment, depending on the asset and circumstances.
Common items that may be removed include:
- Carpet
- Blinds
- Appliances
- Air conditioning
- Hot water systems
- Kitchen cabinetry
- Bathroom fittings
- Floor coverings
- Lighting
- Commercial fit-out
- Office partitions
- Hospitality equipment
- Shop fittings
Scrapping can also apply to parts of commercial fit-outs and capital works where appropriate.The best time to review scrapping is before renovation starts. A pre-renovation depreciation review can record the existing assets before they are removed.
If the owner waits until after everything has been demolished and disposed of, it can be harder to support the claim.
Koste.ai can help property owners understand whether a renovation may create a scrapping opportunity and whether a QS review should be completed before works begin.
Frequently Asked Questions
When is the best time to complete a scrapping review?
Before renovation begins. Once assets are removed or demolished, it can be harder to identify and document their remaining tax value.
Can I claim scrapping on residential property?
Scrapping opportunities exist for both residential and commercial properties. For residential properties, the second-hand plant and equipment rules may affect what can be claimed.
What is a balancing adjustment?
A balancing adjustment occurs when a depreciating asset is disposed of before the end of its effective life. The remaining written-down value may be deductible as a loss.
Do I need a quantity surveyor to support a scrapping claim?
A quantity surveyor can help document the existing assets and their remaining value before renovation, providing supporting evidence for the scrapping deduction.
What happens if I renovate without doing a scrapping review first?
If records of the removed assets are not available before demolition, it can be much harder to support a scrapping claim. Acting before works begin is strongly recommended.
Written by Koste Team · Koste Chartered Quantity Surveyors · AIQS Member · RICS Member · TPB Registered · 1300 669 400 · info@koste.ai