Is replacing a falling retaining wall tax deductible?

I have a retaining wall at my investment property that has a substantial lean and was told by a structural landscaper that it could fall down at any time. They have advised that I replace it soon. I am quite concerned due to the potential safety issues it poses. If I get the wall removed and a new retaining wall erected will it all be tax deductible?
I have some realised profits from other investments that I will be claiming this financial year. It would be ideal if I can fund the replacement of this retaining wall with the capital gains from my sold investment.

 

Yes it could be unless you improve it.

 

Thanks for the quick reply Terry. Are you able to discuss this issue further over the phone? Am happy to pay for a quick consult. I just want to make sure I am fully aware of where I stand tax wise so that I am not hit with a funding or tax shortfall.

 

Prob cheaper if you contact an accountant. Basically if you replace it with a same type it would be a repair but if you change the type of wall it would be an improvement.

 

Thanks. Will give an accountant a buzz.
With a repair I can write off the full amount in the current financial year and an improvement has to be depreciated over its lifetime? Is my understanding correct?

 

Yep

 

If it was a repair to remedy a defect and its not a replacement (entirety) then it should be deductible when the works are completed and paid. Also its not a recently acquired property with a defect that was evident when acquired in which case it is NOT deductible because it is an initial repair (even several years later) but is eligible for Div 43 capital allowances.

 

On this point @Terry_w @Paul@PFI , is a retaining wall that forms part of a boundary fence between 2 lots the financial responsibility of the uphill party, the downhill party or both party's 50/50?

 

That is a separate legal question. I don't know the answer off the top.

 

If it forms part of a boundary fence I would expect it to be 50/50.

 

Each state has a neighbouring fences act. This may or not be a element of the retaining wall. If it does the cost for the retaining wall is borne equally or according to state law they may have a neighbouring fences dispute.

Otherwise generally speaking a retaining wall retains land mass on one side. They usually receive the benefit of the wall. They may need to pay for repairs when defects impact other property owners. That said in many cases it may need to be paid equally. There can be cases where it is the sole responsibility of one party.

eg Paul owns a house that adjoins a shopping centre. The loading dock is excavated and a 3 metre high solid enginered concrete panel retaining wall runs the property boundary length with 12 neighbouring homes. The wall is not less than 6 metres high (2 mt + above ground level to the retained homesites) and comprises massive steel ""I"" beams and stressed concrete panels weighing over 1 tonne each that are 3.5metres x 1.5m x 200mm thick. The loading dock operator had engineering drawings and consutant design installed the wall as a functionally critical element of the building approvals numbered (No XXX) and is clearly a sole user of the retained land and the design is intended to be commercial and part of the commercial premises and not any neigbouring residential homesite. In the event the wall is damaged, defective or fails the shopping centre will pay all costs and subsequent damage caused to any property that is attributable to the wall structure. The shopping centre is expected to maintain that wall at all times. It is not reasonable for a neigbouring fence with a home to be engineered this way. No element of the retaining wall can be reasonably attributed to a neighbouring home. Council has added modifications to the original site consents for all affected homesites which affirm this position as the homes were not constructed until after the centre was completed but this would have been a consent if it had been considered at that time. This issue cannot be noted on land title with the LTO and is best addressed in this manner for all parties. The shopping centre has agreed in writing to the consent modification.
(This is a edited extract of a letter from Hills Shire Council to me obtained when acquiring my home)

Legal advice ( as I obtained) is important in each case unless mutual agreement is made as to who is liable.

 

Thanks guys - found it NSW legislation and yes 50/50 is the advice thus far as the retaining wall supports the dividing fence. Useful exception Paul but in this case both blocks are residential.

 

Which land is supported? Seek ok legal advice. If it's a fence then it's likely addressed by neighbouring fences law