Maximum deduction possible amount under new rule ?

Discussion in 'Accounting & Tax' started by AlbertWT, 19th Jun, 2017.

Join Australia's most dynamic and respected property investment community
Tags:
  1. AlbertWT

    AlbertWT Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    222
    Location:
    NSW
    Hi All,

    I've just moved in to my IP today after renting it for about 5 years already.

    So after the tenant vacated the property, I started to commence the renovation as well as upgrade of fee components like:

    Airconditioning unit upgrade
    Flooring replacement
    Painting
    Replacing all LED
    Bathroom renovations
    Etc...

    So which component I can still use for deduction before 1st July 2017 under the new law ?

    Thanks in advance,
    Al
     
  2. Marg4000

    Marg4000 Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    6,377
    Location:
    Qld
    None.

    You say you are renovating and upgrading and have moved in.
    Marg
     
  3. kierank

    kierank Well-Known Member

    Joined:
    20th Jan, 2016
    Posts:
    8,414
    Location:
    Gold Coast
    At best, you can only claim for repair work done in this FY (that is, next two weeks) as next FY there is no rental income.

    The work has to be repairs (not upgrades) and they must be like-for-like (LfL), not improvements.

    I understand the wear-and-tear occurred while the property was rented. I am not sure that you have moved in makes any difference. You need to check this out with a tax accountant. Assuming that it doesn't change things, my thoughts are as follows:

    Airconditioning unit upgrade - NO
    Flooring replacement -YES (LfL)
    Painting - YES
    Replacing all LED. - YES (LfL)
    Bathroom renovations -YES (LfL)

    Warning: above is my opinion, not tax advice.
     
    AlbertWT likes this.
  4. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    23,319
    Location:
    Sydney
    There is a special rule for a former IP that becomes a PPOR. Tenancy related "make good"repairs (only) remain deductible but MUST be completed and paid prior to 30 June or the deduction is lost. The ATO is silent on the issue of whether these issues must be made prior to your occupancy. They offer no guidance on that issue.

    The expenses must be repairs and not capital works improvements eg
    Painting = Yes. Replacement of lights = No. renovations = No Flooring and AC = No. However if the former flooring and AC are shown on a QS report they may be capable of being scrapped at the present date if they arent a pooled asset.
     
    AlbertWT and SimonQld like this.
  5. AlbertWT

    AlbertWT Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    222
    Location:
    NSW
    @Paul,
    Yes, the previous QS report was listing the AC and the laminated timber flooring, both of them was replaced with better quality.
    Does scrapped as in removed or rendered invalid since I'm using it as PPoR?
     
  6. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    23,319
    Location:
    Sydney
    If the end of the asset effective life terminates at the final day of rental then.......you just must demonstrate that asset has terminated. No good for contined use but ok for those to be demo'd replaced etc
     
    AlbertWT likes this.