The Tax Advantages of

Home Renovations

Call Us Today

(08) 9468 7555

Website:

http://www.therenovationcompany.com.au/

Most Australian homeowners and property investors have made at least one major home

renovation, and some do soon a regular basis. The Australia Bureau of Statistics shows that

building approvals for renovations reached over $6.35 billion dollars in 2012 alone, and the

figure only seems to be growing as time goes on.

There are several tax advantages to

renovating a property. These vary

depending on whether the purpose is

for personal or business reasons.

1. Capital works deductions – For

rental property investors who wish to

make major structural improvements

or expansions to their properties,

they have the option of claiming tax

deductions for the cost of the

construction. Similarly, most

expenses related to the maintenance

and repair of the property are also tax

deductible.

2. Primary residence tax exemption –

In the majority of cases, property

owners that choose to improve and

renovate their primary residence are

under no direct tax obligations, either

income or capital gains wise. Any

improvements on land adjacent to the

home also fall under this rule.

Those who renovate and sell their

home are also exempt from paying

GST, as their intention is not for

enterprise purposes, but for a private

transaction.

3. Net loss tax deductions – For those who actively engage in the business of buying

properties, renovating them, and then selling them for a profit, any losses they incur directly

reduce their taxable income. Calculating the net loss includes the expenses of buying,

holding, renovating, and

selling the property.

4. Capital gains for personal

investors – Those who do not

make a living from buying

and renovating properties

cannot count capital losses

against their personal

income. On the other hand,

they can still freely count

these losses against any

capital gains they make on

other properties.

One of the main factors that

investors and homeowners should be aware of is that in most cases, people can only claim

deductions during the year. Knowing the relevant laws and being quick to act can help

property owners save a considerable amount of money.

Sources:

http://www.therenovationcompany.com.au/

http://www.abs.gov.au/

https://www.ato.gov.au/