deducting low-value assets on rental property, extractor fanAre you confused about the rules regarding deducting low-value assets on rental properties?

Let’s take a look at the scenario where rental property owners have made improvements to the property with low-value asset purchases. They have added insulation in the ceiling and installed an extractor fan in the external wall of the bathroom.

The government has temporarily increased the threshold for 100% depreciation claims on assets costing less than $5,000 purchased between 17th March 2020 and 16th March 2021. As each of these improvements cost less than the $5,000 low-value asset threshold, the owners now would like to make an immediate deduction for the full cost of the insulation and extractor fan under the new temporary rule.

Unfortunately, there are rules regarding immediate deductions of low-value assets that require that “the item has not been and will not become part of any other property that is depreciable property”. In this example, both the insulation and the extractor fan have become depreciable property of the rental. They both form part of the building, and therefore the residential building depreciation rate of nil applies.