As the end of the 2016-2017 Financial Year draws near, it’s time for property investors to look at ways to reduce their tax and maximise deductions.
And one of the best ways to do this is to install air conditioning if your rental property (or properties) doesn’t already have air con…
and upgrading to a ducted air conditioning system if it does.
According to Dargan Financial in their report: Increasing Your House Value, “ducted air conditioning is one wow factor that can significantly help in increasing your house value.” [Click here for our special offer on Ducted Air Con.]
And, of course it also enhances its rental appeal.
Small business owners can claim assets they have purchased under $20,000 – such as air con – as an immediate deduction outright.
However, this tax rule doesn’t apply to property investors; any improvements you make have to be depreciated over a number of years.
Which still works, and there’s no time like the present to get the depreciation ball rolling.
Furthermore, if you are replacing an air conditioner, you may be able to write off the old unit – partially at least – on the grounds that it is old, damaged or ineffective. (Ask your tax agent for full details)
The Australian Tax Office does allow you to claim a deduction on air con repairs and maintenance.
In fact, you can claim an immediate deduction on maintenance and repairs if your investment property is currently rented.
So if the air con in your investment property isn’t working as well as it should be, or if it’s been a while since it was serviced or maintained, the next few weeks could be the perfect time to get it fixed or serviced…and claim your tax deduction.
You were going to do it anyway, so why not get it done this financial year?
Regardless of whether you are trying to appeal to future renters or potential buyers, air con is a wise investment.
A special consumer survey by www.finder.com.au found that air conditioning was at the top of Australian home buyers’ wish lists, with 65 per cent of respondents saying it’s the single most desirable property feature.
A subsequent report in the Daily Telegraph also said that air con was the most sought-after feature in a new home, but that’s a topic for another day.
With three in four modern Australian households boasting air conditioning, Aussies clearly appreciate keeping cool and comfortable in the hotter months, and warm and cosy when the temperatures plummet.
That’s important to keep in mind when showing renters/buyers through your rental home, townhouse or apartment.
Making sure your rental property is cool if it’s hot outside, or warm and cosy if it’s chilly, will make the property more attractive; it could help you achieve a higher rent AND ensure that it is rented year after year.
Especially if there are not many air-conditioned houses or units available for rent in the surrounding area or price bracket.
Based on the universal appeal of air conditioning, it’s perfectly conceivable that you could negotiate an extra $30 per week rental income for your house or unit.
This means that you could recoup the cost of the air con in just over two years, and after that you can sit back and pocket over $1500 extra rent in the following years, based on today’s rent (more if you increase the rent down the track).
And that doesn’t even take into account the tax benefits mentioned earlier, such as depreciation.
On top of that, there are the unseen benefits of having an air-conditioned rental property.
To sum up, installing or updating air conditioning in your rental property makes a lot of good business sense on quite a few levels, be it a tax deduction, or as a lure to attract more (and more desirable) long term tenants.
However, before you contact Acer Services – as we strongly suggest you do before the end of the financial year – definitely have a talk to your tax agent.
The tax laws are continually changing, so they may be able to give you more up-to-date information.
NB. We are exceptionally good air conditioning suppliers and installers. We are not accountants. The financial information we have supplied in this article is true and correct to the best of our knowledge, however you should discuss the facts with your accountant or tax agent to see if it is right for your individual situation.