Any rental improvements made during the past financial year must be captured in an updated tax depreciation schedule or property investors are at risk of making a costly mistake, a quantity surveying firm has warned.

The critical reminder from BMT Tax Depreciation to property investors lodging their tax returns in coming months will help reduce risk of being out-of-pocket and facing the scrutiny of the Australian Taxation Office (ATO).

BMT chief executive Bradley Beer there are nuances between how renovations and general maintenance are claimed at tax time –  some property alterations can be claimed immediately, while others must be claimed using depreciation and pooling.

“A rental property improvement is a renovation where something is improved beyond its original state. It must be claimed with depreciation,” he said.

“Because improvements are often required due to wear and tear or damage, investors mustn’t mistake them as repairs or maintenance, and should include them in their tax depreciation schedule.

“An improvement is retiling a bathroom, while fixing cracked plaster is a repair and oiling a deck is maintenance.”

Mr Beer acknowledged it may be tempting to claim improvements as repairs or maintenance as the full amount can be claimed instantly rather than depreciated over time, but warned any mistake could be costly.

“There’s no doubt that an instant claim is more appealing, but it’s against taxation legislation and such a choice will come under harsh ATO scrutiny. However, it’s important to mention that just because it needs to be depreciated doesn’t mean it can’t be immediately deducted.” he warned.

“Immediate deductions are available to certain assets that cost less than $300. For example, a ceiling fan worth $290 can be immediately deducted in the financial year of purchase.

“Depreciation can be claimed on some assets for up to forty years. Therefore, the small effort of updating the schedule now pays off throughout the lifetime of the investment.”