Cladding – Tax Deductions – Repair or Improve – ATO Determination

Published December 10, 2018 | By Napier & Blakeley

Recently the ATO has determined the replacement of ACC (Aluminium Composite Cladding), is in fact an improvement to your property and not a repair.

We have several clients who are now reviewing their ACC on their sites and discussing with their fire engineer a solution to rectify their property and make safe moving forward.

The ATO have clearly said these costs will be a capital improvement for the purpose of Division 43 of the ITAA 1997 (refer to the link further below).

In financial modelling, this means, if the new cladding installed cost $1m, you can depreciate this cost from completion of installation over the next 40 years (2.5%) which equates to a deduction of $25,000 per year, as an example.

An additional deduction may be allowed to write off the existing cladding, if the original cost and installation was completed after 1979 on hotels (40 year life), commercial, aged care, industrial buildings and similar construction which commenced after 16 September 1987 (2.5%). As we have qualified quantity surveyors registered on the Tax Practioners Board we can provide this deduction for you.

Below is the link from the ATO which provides some more clarity and discussion.

https://www.ato.gov.au/law/view/view.htm?docid=EV/5010053298616&PiT=99991231235958

If you would like to discuss in more detail, please do not hesitate to contact any of our offices and our Property Tax Depreciation teams will assist.

Merry Xmas on behalf of your Depreciation Trusted Advisors and have a Safe New year