Capital improvement or repair?

Hi all,

I’ve been a lurker here for a while but haven’t needed to post...until now.

I have a regional IP valued at $150k. On a recent condition report I was told the shower was leaking and the base has warped allowing water to escape the shower, also water-damaging the timber behind.

I was quoted $3.5k to repair and install a new shower screen. I decided to get a second opinion who recommended ‘gutting’ the whole thing and doing the whole bathroom with Vinyl. This would cost $7.7k.

Would the first option be depreciable and the second option be a capital improvement? Any pros/cons I should be aware of?

Sorry if the answer is obvious but I’m a bit of a newbie to this.

Thanks in advance

 

I'd buy a fibreglass shower cubicle

 

How long have you owned the IP for? If the damage occurred while you were renting it out, you should be okay claiming the $3K as a repair.
You are correct in thinking that if you reno the whole bathroom, it's an improvement.

 

I’ve owned the property for a little over 5 years. I thought maybe I could claim some of the $7k as a repair and some went to capital?

 

Five years is good.
Yep, you might be able to split the total cost into repairs vs improvements. The quote of $3,500 for the repair job would be a useful guide. Let your accountant know that you understand there is a point where a repair strays into improvement territory.

 

Great, thanks for your posts!

 

I wouldnt. The whole lot is an improvement. You cant say you have a $3500 quote so that much is a repair out of a $7K refurb. I think you need to be able to demonstrate two things.

1. That the shower portion is repaired and its cost. Photos of the damage and its replacement using like for like will help that.
2. What the balance relates to.

A detailed invoice breakdown into the two elements is quite important.

 

I probably won’t be replacing like for like, so that means I won’t be able to get away with any of it as a repair even though the only reason I am repairing it is due to it being faulty?

 

It depends on how much of the subfloor needs to be replaced. If the water has damaged the bathroom structurally, there may be some scope for repairs. But the majority of the work will be an improvement.

 

And that where photos help. Timbers that are damaged help support the argument that the repair was extensive as the damage was extensive