Join Australia's most dynamic and respected property investment community

Deductibility of renovation/repairs?

Discussion in 'Accounting & Tax' started by Jmillar, 10th Apr, 2016.

Tags:
  1. Jmillar

    Jmillar Well-Known Member

    Joined:
    27th Jun, 2015
    Posts:
    49
    Location:
    Sydney
    Hi guys,

    Quick question. Recently bought 3 properties - 2 of which will have some repairs/renovations needed. I've heard conflicting advice here, so just wondering whether these repairs/renovations are tax deductible or will form capital works?

    The works include re-carpeting, painting, repairs to guttering, repairing holes in walls etc.

    I was thinking of getting a tenant first, and then doing the repairs as required. I am in a high income bracket so hoping it is deductible!

    Cheers
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,939
    Location:
    Sydney
    Sounds like some capital works and some plant and equipment. both claimable over several years.
     
  3. Depreciator

    Depreciator Moderator Staff Member

    Joined:
    15th Jun, 2015
    Posts:
    716
    Location:
    Sydney
    They're not 'repairs', Jmillar.
    The ATO's definition of repairs is roughly: 'to repair damage done while YOU were renting out the property.'
    What are you doing in fixing stuff soon after purchase is 'improving' the property. You can claim those improvements at 2.5% or add them to the cost base of the property.
    Assets like carpet can be depreciated much more quickly than structural stuff.
    Scott
     
  4. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,358
    Location:
    Sydney
    Some may even be initial repairs evident at time of acquisition. Such repairs are excluded as deductible even if they might have been and are then subject to Div 40 / 43 deductions. eg holes in the wall.

    One issue to consider is that any capital assets that are obsolete as a consequence of these reno's may be capable of write-off. eg a old combustion fireplace, carpet, cabinets that you decide to discard and replace. The former items may have a scrap value. Your QS report may assist or a special report may need to be prepared.