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Re: Solar Hot Water System Rental Repair - Capital Allowance or Capital Works

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Newbie

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Hi,

We have replaced a broken Solar Hot Water System on our rental property, with a complete new unit - about $7000.

Following completion, we have submitted the costs to the well known Quantity Surveyor, who have updated the depreciation schedule report. I understand I can claim a deduction over many years.

 

The deduction is the "Total Depreciation" that includes both Div 40 and Div 43 of the report, and gets lodged under "Capital Allowances" section of the ATO online lodgement I believe.

 

Do I also add the actual out of pocket up front expense of the unit under "Capital Works" section of the ATO online lodgement form?

Is it construction expenditure - I have read as much as I can and still not clear whether I should declare that there.

 

Thanks.

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Best answer

Devotee

Replies 2

The old unit needs to be written off, claim depreciation until the point it was removed, then claim it as a balancing adjustment and $0 received in consideration.

 

The New Unit would be claimed as a new asset, part of it would be under div 40 (15 years) and part of it may come under div 43 (the piping).

 

See Rental Properties 2019 

Page 40 table 3

 

 

3 REPLIES 3

Best answer

Devotee

Replies 2

The old unit needs to be written off, claim depreciation until the point it was removed, then claim it as a balancing adjustment and $0 received in consideration.

 

The New Unit would be claimed as a new asset, part of it would be under div 40 (15 years) and part of it may come under div 43 (the piping).

 

See Rental Properties 2019 

Page 40 table 3

 

 

Newbie

Replies 1

Terrific, thanks.

 

So having the thrid party depreciation schedule report already calculating that (div 40 and 43) should I be putting Div 40 into the "Capital Works Allowance" and Div 43 numbers into "Capital Works", or just put the depreciation total into Capital Works Allowance? 

 

Thanks

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ATO Certified

TaxTime Support

Replies 0

Hi @HolyFrog

 

Welcome to our Community.

 

@macfanboy has provided you with a good answer as well as a link to the Rental properties 2019 guide. Have a good look at the guide as it contains some great information about not only depreciation but rental properties in general.

 

You can also check out the depreciation and capital expenses and allowances page on our website.

 

Many property investors will engage a quantity surveyor or other independent qualified person to prepare a depreciation schedule or report. From what you have advised, you have asked your quantity surveyor to update this due to the recently replaced hot water system.

 

You have also advised that they have calculated the Division 40 and Division 43 amounts for you. Presumably these amounts have been re-calculated to reflect the fact that you have recently replaced the hot water system. 

 

Depending on whether you submit your tax return via myTax or as a paper return lodgment, the amounts should be entered into the rental property worksheet accordingly:

  • Division 40 amount: total capital allowances (myTax) or deductions for decline in value (paper worksheet)
  • Division 43 amount: total capital works (myTax) or capital works deductions (paper worksheet)

 

An example of the paper worksheet as well as a blank one that you can use can be found on page 33 of the Rental properties 2019 guide that @macfanboy has linked you to. For assistance with myTax, refer to the myTax 2019 Rent page on our website.

 

If you are unsure about the information that your quantity surveyor has provided to you, it may be worth getting in touch with them.

 

Hope this helps.

 

Thanks,

 

ChrisR

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