Residential Rental Properties and Healthy Homes Standards

Owners of existing residential rental properties may incur expenditure to meet the Healthy Homes standards. 

Can owners of existing residential rental properties claim income tax deductions for costs incurred to meet Healthy Homes standards?

Costs of a revenue nature are generally deductible in the income year they are incurred and these may include the costs of:

  •  repairing items that would otherwise meet the standards if operational or in a reasonable condition;
  • minor additions or alterations not involving repairs that do not change the character of the building, such as: 

 

  •  some costs of meeting the draught-stopping standards, such as blocking unused chimneys or fireplaces 

   (if sufficiently attached to the building);

  •  making mechanical ventilation systems compliant; and
  •  some costs of meeting the moisture ingress and drainage standard in respect of ground moisture barriers;
  •  replacing items on a like-for-like basis in the future where they have previously been treated as part of the building; and
  • record keeping and providing information in tenancy agreements.

Capital costs will generally result in a deduction for a depreciation loss unless they are for something that is part of the residential rental building. The cost of items that are part of the building are added to the building's cost and depreciated at the same rate as the building. Generally, this is zero percent.

Items that are likely to be part of the building include:

  •  smoke alarms;
  • insulation;
  • ducted or multi-unit heat pumps; 
  • flued fires (wood or gas);
  • new or replacement openable windows;
  • new exterior doors; 
  • most extractor fans or rangehoods;
  • ground moisture barriers; and 
  • drainage systems for storm, surface and ground water and drainage of water from roofs. 

 

Capital costs for some items acquired that are not part of the building will be either: 

  • depreciated over multiple income years using a rate set out in Depreciation Determination DEP80: Residential rental property chattels for assets of that type; or
  • depreciated at a rate of 100% in the income year the expenditure is incurred if the item is a "low-value asset". 

Items able to be depreciated include:

  • electric panel heaters (67% DV or SL);
  • some heat pumps (eg, single-split type) (20% DV or 13.5% SL); and
  • through-window extractor fans, window stays, door openers and stops, external door draught excluders and some devices for blocking fireplaces or chimneys (if the devices are not sufficiently attached to the building) (40% DV or 30% SL). 

 

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Please note: The above E-newsletter notes and the related articles on our website are of a general nature and therefore we urge clients who may be affected by these changes to contact us to discuss your specific circumstances before making any changes or drawing any conclusions.

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    159 Hurstmere Road
    P O Box 331 626
    Takapuna, Auckland

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