A friend of mine has a house that's 15-20 years old and tiles in the living area (so a big job) are coming up and breaking apart and need to be replaced. He is planning to replace the floor with new tiles. Is this considered a repair that he can claim right away (a he is replacing with the same thing) or does this need to be depreciated over 40 years and have the old tiles written off? Cheers
I'd first be concerned with why the tiles are coming up and breaking apart. It sounds like there is movement in the floor which needs to be addressed first before gluing down new tiles. I think (??) tiles have a depreciable life of 40 years (but a bean counter on here will advise), unlike carpet which is 10 years and floating timber which is 15 years.
This is correct. Because you're replacing the whole floor rather than just patching it up (it's irrelevant that the tiles are the same), it sounds to me like this will have to be claimed as a capital cost (i.e., over 40 years), which is of course not ideal. Get a second opinion from an accountant.
Thanks for your comments. My understanding is the issue that caused the tiles to crack has been resolved so no problem their. They are obviously keen to claim it immediately not over 40 years so what are the ways to do this? They are planning on leaving the bathroom/toilet tiles as these are fine, would this count as not replacing the whole floor (tiles their are a different colour though)? If that is not enough would leaving a few of the tiles in the living area that are still ok count be enough to call it a repair? If so how many would you have to leave? Cheers
The dividing line between a repair (immediate deduction) and a capital improvement (deductible over a number of years) is not clear. It's a tricky area of tax. The ATO's ruling on the issue is TR 97/23: https://www.ato.gov.au/law/view/document?docid=TXR/TR9723/nat/ato/00001. If you replace the minimum number of tiles to repair the damage I think you have a good argument that is a repair. If you replace the entire living room (but leave the bathroom & toilet tiles as is) you still have an argument but it's not as strong. This example on the ATO website is relevant: Example 5 Caitlin's rental property was partially inundated with water due to flood. Caitlin needed to replace the carpet in the lounge room and one of the bedrooms. Caitlin decided to replace the carpet throughout the property. If Caitlin had just repaired the damaged carpet she would have been allowed a deduction for the repair. As the whole carpet was replaced, Caitlin may be able to claim a deduction for the adjustable value of the carpet that was disposed of and a deduction for the decline in value of the new carpet. Has your rental property been damaged or destroyed by a natural disaster? | Australian Taxation Office It would be worthwhile getting a private ruling on this. Have a look through the register of private binding rulings to see if you can find a similar factual scenario where the ATO has allowed an immediate deduction for a repair and then refer to it in your private ruling application: RBA Search | Australian Taxation Office.
You may be able to get a scrapping report done on the existing tiles - if they get written off over 40yrs, there should still be some value in them to write off?
The underlined is the key element to that outcome. If the OP was to repair the tile damage (only) and not all the tiles eg to match I would agree it would be deductible. If the existing tiles were relaid where they had lifted it would also be deductible. However, the question was to replace the whole floor of a 15yr + build. That is capital expenditure.
