Stormwater replacement - repair or capital works?

Discussion in 'Accounting & Tax' started by ctu1890, 29th Jan, 2018.

Join Australia's most dynamic and respected property investment community
  1. ctu1890

    ctu1890 Member

    Joined:
    22nd Apr, 2017
    Posts:
    15
    Location:
    Melbourne
    Hi forum,

    So I've had this Ip for a month and tenants had moved in Friday. Following Monday I have had all the old terracotta stormwater pipes underground replaced due to years of tree root damage. Now the job took place when my tenants were occupying the house but of course the damage to the old pipes occurred over the years prior to my ownership.

    1.How, Therefore does the cost get apportioned as deductible to me.

    2. Is this considered a repair for immediate deduction? Or a capital works?

    To be clear. The job involved excavating. Laying new pvv pipes between downpipes and treat drain, leaving old pipes buried.

    Many thanks in advance
     
  2. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    19,664
    Location:
    Sydney or NSW or Australia
    1 - if you paid for it, it is a cost to you, why would you share it?

    2 - Capital works as it was pre-existing but would be dependent upon how much you replaced.Entire/majority of the pipes is likely to be capital, one one two broken pipes a repair.
     
  3. Depreciator

    Depreciator Moderator

    Joined:
    15th Jun, 2015
    Posts:
    1,751
    Location:
    Sydney
    You've replaced the old pipes with new ones a month after getting the property. In writing this, I think you know the answer:

    'Now the job took place when my tenants were occupying the house but of course the damage to the old pipes occurred over the years prior to my ownership.'
     
    Propertunity likes this.
  4. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    14,474
    Location:
    Sydney
    1. No. Non-deductible. This is classified as an initial repair. Initial repairs remedy a defect known or unknown that was in the property at the time of acquisition. Tax law assumes you paid less that fair market due to the defect even if you had no idea it was there. Diligent pre-purchase inspection should have picked that up - No guarantee however. Merely flushing water isnt a great test. Loo paper and water are a better test. Often will overflow to the stink cap.

    2.Neither :-(
     
    Propertunity likes this.