Can I claim depreciation on insulation costs?

Robert asks:
(updated on Wednesday, December 02nd 2009)

Can you advise if the IRD would treat the costs for ceiling and underfloor insulation as an improvement to be capitalised and depreciated or essential maintenance? I have recently fitted both in a rental property but did not go through the EECA scheme as a direct route was more cost effective even with the government subsidy figured into the equation.

Our Experts Answer:

I think the important thing here is that the insulation work is integral to the building and is therefore simply maintenance to the building. IRD have been very determined to prevent investors from seperately capitalising individual items of building fitout as seperate assets and have issued a ruling that essentially says that an item must be capable of physical or functional seperation from the building to be a seperate asset. So if you follow this logic it stands to reason that the insulation work is not a seperate, stand alone asset and is therefore repairs to the building despite the fact that there may not have been insulation there previously.

Mark Withers and his team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.

 

 

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