With the Summer storm season around the corner, now is the time when many property investors look at ways to minimise the damage from possible impending natural events or, unfortunately, have to clean up the aftermath.
On Monday, 10 October The Bureau of Meteorology released their Tropical Cyclone Season Outlook for 2016–17 marking the start of severe weather public awareness campaigns in northern Australia. While their climate outlook for October to December 2016 predicts the strong change of above average rainfall for the period in southeast and northwest Australia. Residents and home-owners in areas likely to be effected by severe weather events this summer are being reminded to prepare now for the coming season.
When thinking about what preventative works or repairs to carry out on the yard and gardens of your investment properties there are a few issues to be aware of regarding landscaping expenses and whether or not you will be able to claim outright deductions for these.
Landscaping is generally non-deductible in terms of your annual tax return. However, you should keep a record of these expenses as they will form part of the calculation of the capital gain upon sale of the property.
Landscaping is not defined in the Income Tax Assessment acts, therefore the general meaning must be applied. The definition of landscape is ‘to improve the landscape’, thus making it capital in nature and not outright deductible. Depreciation on these works are not available under Division 40 and Division 43 as it is necessary to identify specific items of plant and equipment. Division 43 is not available as landscaping is specifically excluded in section 43-70(2)(d).
Some examples of landscaping works that are not outright deductible can include:
- Tree Lopping
- Re-turfing the lawn
- New footpath/driveway
- Cultivating garden areas
- Garden Lighting
Ongoing expenses in order to maintain the property which should be deductible and in your tax return, include:
- Mowing the lawn
- Laying fertiliser
- Pruning bushes/trees
It is important to consider these facts before carrying out any major works on your properties or when formulating tax minimisation plans for yourself as a property investor. Depending on your tax situation or where you are in your property investment journey, regular ongoing maintenance may be more tax effective. Of course the age and location of your investment property may take the decision out of your hands if you need to carry out some landscaping works on the property in order to maintain its appeal and attraction to tenants.
The principles of landscaping are important to consider whether you own an investment property or carry on a business.
If possible, you should always discuss any planned projects with your tax advisor to discern the most tax effective treatment of any planed improvement projects to your investment property.
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David Shaw is the CEO of WSC Group: Certified Practising Accountants and Business Advisors, and
was voted Property Tax Specialist of the Year in the Your Investment Property 2013 Readers Choice Awards (as well as runner up in 2012, 2014 & 2015).
*The advice published on social media mediums by WSC Group is of a general nature and does not constitute specific financial advice. For a detailed financial strategy you should consult with a qualified financial advisor before making any investment decision.
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