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Depreciation could supercharge reno returns

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Renovators who understand depreciation thresholds can boost their tax deductions, a leading quantity surveyor has said.

When calculating depreciation, in certain cases the item's price will determine its rate of return, according to Tyron Hyde from Washington Brown.

“You should consider the tax deductions attached to the price of items,” Mr Hyde says.

Products costing less than $300 can be written off in a lump sum while products costing less than $1,000 get pooled together and depreciate at a higher rate, according to Washington Brown.

If renovators are choosing between two similar products, these thresholds can determine the size of an investor’s rebate, Mr Hyde says.

“If you were to buy an oven for $980, you would get 37.5 per cent tax rate for it as opposed for an oven for $1,020 where you would get a tax rate of 20 per cent per annum,” he says.

However, he warns renovators their top priority should be a property’s rental appeal, rather than tax policy.

“Some people ask, 'Should I put carpet or should I put tiles? Which depreciates better?' I think it's not a bad idea to have depreciation in your mind but I think it's more important to build to the marketplace,” he says.

Mr Hyde believes choosing the cheaper of two comparable items is unlikely to impact on the property’s rental prospects.

“I don't think a tenant knows the difference between a $280 microwave and a $320 microwave but my accountant does,” he says.

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