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Repairs, Capital works, settlement

Discussion in 'Accounting & Tax' started by dabbler, 25th Jan, 2016.

  1. dabbler

    dabbler Well-Known Member

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    Hi All,

    When buying, and a place needs works over 5k, if it is really repairs due to no maintenance, it should not really matter tax wise who pays for the work or who it is invoiced too.

    Being more specific, if replacing stairways that are non compliant and possibly dangerous, that are in a poor state (need repairs) I assume it would be far better that the vendor pay for these works directly in case any of it is seen as capital works. Being non compliant & also rectifying this may be seen different to straight repairs due to age & lack of maintenance.

    Any complexities in making allowances v dropping price and paying as an owner.

    What are your suggestions or thoughts
     
  2. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

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    Initial repairs arent deductible, they are capital in nature and so are depreciated.

    Who does them is irrelevant as work done prior to purchase can still be depreciated by you as the new owner.
     
  3. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Large scale repair poses a concern regardless of whether its the new buyer (initial repairs) or the former owner. "Replacement of the stairs" is capital expenditure and a deduction limited to capital allowance deductions at 2.5%pa in any event.
     
  4. dabbler

    dabbler Well-Known Member

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    Thanks guys.

    What I am thinking is this....

    If buying for 300k and you find say 10k of repairs, then the vendor agrees to fix this before settlement, this would be better than getting a 10k allowance and then you getting invoiced and paying for this yourself OR getting a 10k purchase price discount then paying for the work yourself.

    Although the settlement may show the 10k allowance of funds going somewhere, maybe to agent,

    Hope this makes more sense, is it 6 one half dozen the other for tax time and CG time when selling.
     
  5. Scott No Mates

    Scott No Mates Well-Known Member

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    It is not maintenance no matter how you cut the onion. Alls if the pieces end up as capital works whether paid for at settlement or beyond.
     
  6. Depreciator

    Depreciator Moderator Staff Member

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    I would rather get a discount and supervise the $10K in repairs so I know it has been done properly.
     
    Raydar likes this.
  7. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Understandable. You don't want a $10K job done for $5k and acquire the long term problems. A $10K discount is a better bargain. Of course the vendor will argue a $5K reduction.
     
  8. dabbler

    dabbler Well-Known Member

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    Apart from the potential obvious out of pocket, trying to figure out if it is better one way or another who pays for and gets the work done.

    From a purely tax or CG perspective, assuming the job done would be the same, is one way better than the other, it would seem CG may be less ?
     
  9. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Zero difference. I would argue the sole issue is if you believe you get fair value for the price adjustment. If you do it you can control the outcomes. If you trust vendor to do a quality job it could be a dispute later if they get a cheap price done badly.
     
  10. wylie

    wylie Moderator Staff Member

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    Our son's place was bought within hours of us seeing it to get it off the market before the scheduled open. We didn't muck about. Stairs were newish but spaced wrongly - trip hazard.

    Had we mucked about asking for reduction we would likely have lost out to someone else. House settled and he moved in and paid our builder friend $2k to install a new set. Hubby and son removed old stairs to save money. New ones will be depreciated.

    Much of how to play these things depends on the conditions and price.
     
  11. dabbler

    dabbler Well-Known Member

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    Hi all, thanks, was mainly looking at the tax and CG sides & if there was a best way.

    I am not worried about the job/s, with the stairs I have spoken to the proposed contractor, it is my choice how it is done & by who now as well, would not mind a name and number by PM if you know yours Wylie in case this guy get's busy or other, will msg you :)

    Thanks again everyone for responses.
     
  12. wylie

    wylie Moderator Staff Member

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    I'm stuck (passenger) on gateway bridge (caused by accident) and will PM when I get a chance. Remind me if I forget ;)