I'm think I know the answer, but why not ask. I have a property vacant for the first time in 15 years and lots to do to bring it up to standard. Most is cleaning and minor repairs such as door handles and broken switches, but also the whole interior is being re-painted. Is the painting an expense or capital cost? That is, claimable now or added to building depreciation?
If it relates to damage or wear and tear done while it was income producing and merely bringing it back to the original state (which most painting does) then it would be deductible as an expense
I am in the exact same situation and am also rather out of date with my knowledge .... In my case it has all been rental wear. Is it the same for carpet ?
I’m not an accountant but I believe the answer in No. Carpet replacement is capital and one needs to depreciate it.
TR 97/23 indicates that expenditure for repairs to property is capital in nature and is not deductible under section 25-10 of the ITAA 1997 if the extent of the work carried out represents a replacement, renewal or reconstruction of an entirety, rather than a replacement of subsidiary parts of a whole. So if you incurred costs in replacing the carpet in your investment unit when it was irreparably damaged and the area of carpet you replaced was identical in area to the damaged carpet and the replacement carpet was of a similar quality to the damaged carpet then replacing the carpet has not resulted in a greater efficiency or function to your investment property. It has merely made good the damage. Therefore, replacing the carpets is not capital in nature and would be fully deductible. However if the replacement of the carpets is regarded as the replacement of an entirety then the expense is capital in nature and not deductible under sections 8-1 or 25-10 of the ITAA 1997. Dont you love our simple tax system.
I know it doesn't help but here in the USA the IRS has a great rule where you can expense any repairs same year as long as under $10k per annum (per property). Means our IRS filings for IP's are way easier her in the USA than they are in Australia ATO....
The repair is deductible - as Mike has indicated. If the property has ceased to be a IP the repair MUST be made prior to 30 June even if it is done while the property is the main residence. This issue is often not understood by people who move into a former rental. However it doesnt mean a renovation after the rental is all deductible.
What about replacing rusted guttering and repointing a tired roof on an IP that hasn't had any attention for 20 years (but has only been owned for 5 years)?
Probably known at time of purchase. Doesnt bring back to original condition. Sounds like an improvement. Capital. Depreciated. Maybe
Repointing or even retiling a roof likely deductible subject to the issue of condition at time of acquisition as Mike says. If was in sound condition at acquisition could be a repair. I have had two clients with that issue both in coastal areas and it happend fast....P&B report when acquired did not note any corrosion or defects in roof (Its a good reference point for such a issue) . Salt ate the steel quickly. As the roof is a part of the building you dont need to look at the issue of replacement as a separate asset hence not typically capital in nature unless its not deductible eg initial repair. Replacement of like for like is a key issue too. So replacing steel roof sheets on a whole roof with similar product (ie gal or colorbond) is typically a deductible cost. Replacing gal steel with concrete roof tiles not a repair. Repointing is typically a defect and corrects water leaks - a repair. Subject to initial repair of course. I would think 5 years is hard to endure 5 years of water leaks so potentially deductible if its a new defect issue. Important to consider the use of the property during the ownership period too. If its been a IP for three months out of 8 years a private issue may be evident. Guttering isnt part of the roof and may be capital eligible for Div 43. Replace a apportion and repaint however may be a repair. Maybe.
Sorry to use this thread to get your contact details but I am unable to send you a Private Conversation. What would be the best way to contact you? as I am interested in using your services!.
The would be merely aesthetic and wouldn't provide any extra functionality, so I don't believe it would change the answer. Terry doesn't do PM's so best to checkout his website from his signature and contact him through there.
Changing the colour could be non-deductible. If the sole purpose was to change colour and not remedy a defect. Have never encountered that however. Similar condition would likely cover the issue. No different for say colorbond vs gal etc
