🛠️ Renovating? Don’t Throw Away the Tax Deductions Too.

When you remove or replace an old asset—like an air conditioner, oven, carpet or hot water system—you might be able to claim what’s left of its depreciable value as an instant tax deduction.

It’s called a balancing adjustment, and most investors miss it completely.

If you’re scrapping old assets during a renovation, this guide shows you how to turn that skip bin into a tax-saving opportunity.

🔁 What Is a Balancing Adjustment?

A balancing adjustment is a deduction you can claim when:

• An asset is scrapped, sold, or lost

• And it still has a written-down value (not fully depreciated)

Instead of spreading that deduction over multiple years, the ATO allows you to claim the remaining value in full in the year it’s disposed of.

✅ Example: How It Works

Let’s say you have a hot water system listed in your depreciation schedule that:

• Was originally valued at $2,000

• You’ve already claimed $1,200 in depreciation over 4 years

• You decide to replace it this year

That asset still has $800 in written-down value
→ You can now claim the $800 in full as a balancing adjustment.

💡 This only applies if the asset is listed on a valid depreciation schedule and is actually scrapped or removed.

🔍 What Kinds of Items Can Be Scrapped?

Assets that qualify under Division 40 (plant and equipment) are typically claimable, including:

• Ovens, stoves, rangehoods

• Split system air conditioners

• Carpets, blinds, curtains

• Light fittings

• Hot water systems

• Ceiling fans

• Washing machines or dryers (if provided in rentals)

⚠️ Keep in mind: For residential properties purchased after 9 May 2017, you can only claim new items you install. Existing items may already have a $0 value depending on the ruling.

💼 Real Investor Example: Kitchen Replacement

Investor: Sarah owned a 2003 investment unit in Melbourne. In 2023, she replaced:

• Oven (installed in 2015)

• Split system AC (installed in 2018)

• Carpets (10+ years old)

What we claimed:

• Oven: $540 remaining → fully deducted

• AC: $1,150 remaining → fully deducted

• Carpets: already fully depreciated → $0

Total balancing adjustment: $1,690 added to her tax return that year

🧾 Do You Need a Schedule to Claim This?

Yes. The only way to claim a scrapped asset is if it:

• Was previously listed on a tax depreciation schedule

• Or can be added via an update before disposal

That’s why it’s critical to update your depreciation schedule before completing renovations or asset replacements. If you don’t, there’s no paper trail for your accountant to base the deduction on.

🔁 When to Review or Update:

• Before major renovations or cosmetic updates

• After replacing mechanical or electrical appliances

• Before the end of financial year

• When updating schedules for tenancy or lease changes (commercial)

📦 Need to Claim Scrapped Assets?

TaxShield can review your schedule and identify claimable scrapped assets. We prepare full updates or new reports that include all eligible items—new and old.

✅ ATO-compliant
✅ Prepared by Chartered Quantity Surveyors
✅ Fast turnaround before EOFY

📩 Update My Schedule to Claim Scrapped Assets