Due to the Healthy Homes standards introduced in July 2019, private rental property owners are required to comply with minimum standards for heating, insulation, ventilation, drainage and draught stopping by 1 July 2021 for existing tenancies.
Generally, costs relating to healthy home standards are capital in nature and will be treated as an asset. This means you don’t get to claim the whole cost at once, the cost is claimed as depreciation and is spread out over a number of years.
However, as part of the governments Covid-19 business support options, there has been a change to the threshold for depreciation of assets from $500 to $5,000 for assets purchased from 17 March 2020 to 16 March 2021. Beyond 16 March 2021 the threshold has been permanently increased to $1,000.
This means if you need to purchase a source of heating or a ventilation system to meet healthy homes requirements, and the full cost is less than $5,000, doing this before 16 March 2021 could mean 100% is offset against your rental income in the 2021 Financial Year.
Examples of costs that will be treated as an asset if over the threshold ($1,000 from 17 March 2021):
- Heat pumps
- Ventilation Systems
- Insulation
- Extractor fans
- Vapour barrier
Any work you require to bring existing systems up to scratch, will usually be treated as Repairs & Maintenance and 100% is claimed against your rental income in the year which it is paid for.
For example,
- Insulation top ups
- Heat pump servicing
- Fireplace maintenance
- Draught stopping
- Windows & Doors maintenance (replacing like with like, i.e. no upgrade to double glazing)
As always, our advice is to check with your accountant or contact us to discuss your specific situation.
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