When to put new Kitchen into IP?

[Melbournee]

Current tenants leaving the IP tomorrow.
The house is old and might need a couple of things to update - was thinking of starting with Kitchen.

1) When to put in a new kitchen?
When can any updates etc be claimed in the tax? If the house is already leased out or can I do it now when the house might be free for a week or two.

2) How much of the cost gets claimed back? rough percentages etc will do...
I earn 60K and my wife earns 45K and the house is 350K with only a 300 PW rental.

Still tossing up whether to put a 2K cheap IKEA kitchen or something better?

 

[Aaron_C]

Putting a new kitchen into an IP is considered a capital cost which can be depreciated over a few years depending on the thing being put in rather than being fully deductible. For a full list of items that can be depreciated and their effective life, have a look at : http://law.ato.gov.au/atolaw/view.htm?docid=TXR/TR20112/NAT/ATO/00001 and search for 'kitchen'.

Given the value of the IP, an IKEA kitchen will probably do

 

[Jamie M]

Is the current kitchen structurally sound? If so, you could possibly get away with adding new doors, handles, a benchtop and sink. It will look new - and it's a cheaper way of achieving the same outcome.

Cheers

Jamie

 

[josko]

It depends on how bad your current kitchen is.

If you have a really old kitchen, you may get a better quality tenant by replacing it with a newer one.

Regards JO

 

[Melbournee]

The kitchen is really old and bad. The house is 50 years old - from the appliances the kitchen looks older than that

so no difference ($$ wise) if a house is rented or NOT at the time of kitchen upgrade?

also, lets say the kitchen is worth 6000- how much (just a rough idea) can be claimed in depreciation every year?

 

[marg4000]

The cost of a new kitchen will be depreciated as part of the building - two and a half per cent per annum over the next 40 years. Any amount claimed as (building) depreciation will be subtracted from the cost base of the property when calculating CGT if applicable.
Marg

 

[Aaron_C]

The cost of a new kitchen will be depreciated as part of the building - two and a half per cent per annum over the next 40 years. Any amount claimed as (building) depreciation will be subtracted from the cost base of the property when calculating CGT if applicable.
Marg

The kitchen is separate from the building and benchtops, ovens, rangehoods even cutlery have different effective lives which are much less than the 40 years for a building.

 

[Propertunity]

The kitchen is separate from the building and benchtops, ovens, rangehoods even cutlery have different effective lives which are much less than the 40 years for a building.

Not kitchen benchtops - no. The bulk of the kitchen will fall under Division 43, Capital Works which will be depreciated over a 40 year effective life or 2.5% per year.

Most new kitchens would have had new ovens, cooktops, rangehoods etc installed and these are classed as Division 40, Plant & Equipment and will attract a shorter effective life averaging around 12 years or 8.3% per year.

 

[nathank]

What hasn't been mentioned is the difference between how a capital improvement and repairs are treated.

if the kitchen is an upgrade (i.e. it looks old and you want more $'s in rent), you depreciate it has been mentioned.

If its a repair, i.e. the kitchen cupboard doors have swelled and are falling apart or the oven is busted, you can claim 100% in the first year as a deduction. But take photos of the bits that are broken in case the ATO come knocking. It's hard to prove that the old kitchen was broken when its at the tip.

-nat