Can I claim a repair if I move back into an IP for the same FY?

A friend wants to replace an external door and set of windows ($15k job) in an IP and claim it as a repair after he's moved back into the IP. Assuming the windows/doors are damaged and need replacing, is this OK to do if the claim is done in the same financial year as the tenants are paying rent?

From the ATO point of view, rent is being declared and deductions are made in same financial year so they wouldn't know if the work was done while the property was rented out or done after the owner has moved back in. So the tenants move out in January 2019, owner moves in straight after and gets the work done. Can the job be claimed because it's in the same FY as he has received rent from the property?

 

No

 

Replacing a set of windows is hardly a repair? Replacing a broken latch or a cracked glass pane is a repair. Replacing the whole thing is a capital expense.

 

So it CAN be claimed as a repair if the work was done BEFORE the owner moves back in?

 

Yes replacing a whole set of windows can be claimed as a repair if the whole set is damaged, e.g weather rotten timber frames. The point is that no improvement work has been done, simply replacing like for like is OK by the ATO.

 

I believe a damaged door or window/s can be replaced and be deductible IF the damage occurred during the period of tenancy. (this excludes such things a short tenancy as the damage may have been evident prior to tenancy eg initial repairs etc) Proof of the damage occurring during tenancy may be difficult to establish but things like a P&B report may help if it indicated no problem and then for the past X years the weather has damaged the frames etc. Failing to prove that issue could mean the ATO deny a claim and the onus is on the taxpayer to evidence when the damage occurred. Replacing all windows when only some are defective may also only be part deductible BUT a QS provided may be able to update the QS report and identify a scrapping value to deduct.

A window is a part of the building. Same with a door. The replacement rule would require the building to be replaced, not just windows etc. Windows are a part of the building and not a separate asset as such. This principle applies for example to a roof. Replacing rusted roofing even if it is the whole roof could be deductible.

The repair can occur after tenancy ends BUT the repair must be made and paid prior to 30 June or the deduction would then be lost. This rule is rigidly applied by the ATO and is contained in the ATO rental property guide. For people who end rental and move in as their home around June its a dangerous trap.

Questions like this generally indicate benefits of having a tax adviser so that errors are minimised. Its a quick and simple question and should not involve extra costs. Its something I recommend you check with a tax adviser before actually claiming a deduction.

 

That's great to hear it's considered deductible if the "damage" occurred while it was tenanted. This can be easily proved as it was rented for the whole time after previously being a PPOR.

Thanks Paul so I'll confirm the following is kosher:
1. Tenants move out Nov 2018 after paying market rent for last 6 months of FY ($50k)
2. Damaged door/windows replaced with invoice dated Dec 2018 ($15k)
3. Owner moves back into old PPOR in Feb 2019
4. Tax return for 2019 submitted to ATO with declared rent of $50k and $15k of deductions

 

I cant give you advice here. My post mentions things you seem to ignore.

 

I would say no.