PPOR to be rented - expenses before renting out

If I wanted to rent out my house, but the agent recommends certain things being done before renting it (cleaning, pest control, smoke alarm testing/batteries) are these deductible? Are they made deductible if done after the unit is made available for rent (but before tenant moves in)?

Because it will be rented furnished, I think my furniture is not depreciable because it is then "used", is that correct?

I will purchase bed linen, crockery & cutlery for tenants. Is this deductible or needs to be depreciated?

Capital works - after I purchased the property a major structural issue had to be corrected, and I successfully claimed against the building inspectors as they did not identify this. Is the cost of these works able to be written off at 2.5% p.a. for the period leased?

 

1. no, no
2 yes
3. yes
4. yes

 

If you're referring to furniture you're leaving there that you've used, you can't depreciate it. New furniture installed after you vacate is fine.

It is only deductible if the asset (or set) costs less than $300. Higher than that and it needs to be depreciated.

 

Consumable tenancy items like linen and kitchen items are not subject to the $300 capital item rule and also may be incurred preliminary to tenancy. And are not a repair. It is wise to depreciate over a short self-assessed expected life (or pool them) to avoid ATO disallowance.

 

When it comes to sets, is a set of linen considered to be a set for one bed, or all the beds together since they will most likely will be purchased at the same time?

 

Good question. We would treat each bed's worth of linen as being the set in general. Think about it this way: if you go to Big W and buy a (*looks at website*) "House & Home Polar Fleece Sheet Set", that's clearly a set. If you bought three of them for separate beds, well, they're not really related to each other in the same way as, say, a lounge or dining table set. It would be more like you bought three identical split-system air conditioning units, which wouldn't be a set in any scenario.

 

The ATO consider linen, kitchen items, etc are going to have an effective life of 5 years. Hence a rate of 40% using the diminishing value method.

A unit is addressed in at least one ruling
Taxation Ruling TR 94/11 – Income tax: general investment allowance – what is a unit of property? provides guidelines to help you identify what is a unit. You need to consider whether a particular item is a unit, part of a larger unit, or whether its components are separate units. A unit will generally be an entity entire in itself; something that has an identifiable, separate function. However, it need not be self-contained or used in isolation and it may vary the performance of another unit. An item is not a unit simply because it is described as a system. An item may be made up of several components. To determine what the relevant unit is, you need to consider the function of each component and of the larger composite item. A door handle, for example, is part of the door and not a separate unit. Similarly, a freestanding spa pool that is made up of the shell, skirt, heater, pump, filter and piping is one unit. In other cases separate units may work in conjunction with each other to achieve a common objective. For example, a fire safety system may consist of several components such as hydrants, piping, alarms, smoke detectors and sprinklers. All these components function together to form the system. However, each component also performs its own discrete function independent of the others. In this example, each component is a separate unit.

Typically linen is part of bedding as kitchen items are part of a kitchen. However replacement items may be deductible under general cost principles with the cost limit a factor. That is once the initial items require replacement due to wear, tear, damage and loss. The ATO typically will cross out deductiosn for fitting out a airbnb or fully furnished rental on this basis. And if the items are used they cant be depreciated anyway.