tax deductions on repairs when no tenants

Discussion in 'Property Management' started by Darlinghurst Boy, 15th Oct, 2016.

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  1. Darlinghurst Boy

    Darlinghurst Boy Well-Known Member

    29th Jun, 2015
    Darlinghurst Sydney
    If I wanted to rent my property out say from next month on November 1st and i need to fix the stove, and make some repairs.

    So all these repairs are done in October
    Then i start renting it out in November , can i still claim a tax deduction even though no tenants were inside at the time during October when all the repairs were carried out?
  2. Marg4000

    Marg4000 Well-Known Member

    18th Jun, 2015
    Was it rented previously?
    Or will the tenants in November be your first?
  3. Andrew Hancock

    Andrew Hancock Well-Known Member

    1st Jul, 2015
    Based on the exact wording of your question, the answer is no.

    For maintenance to be tax deductible, the property must be producing income or available to produce income. If you have been advertising the property for rent and during the time it is advertised and available, the maintenance would be tax deductible. The exception to this is that if it is part of an initial purchase the ATO deems the initial repairs to have been factored into the purchase price already and they would be capital in nature and not immediately deductible, even if advertised for rent or actually being rented. This is a grey area with no defined time frame so be careful of initial repairs.

    If you wait to complete the maintenance and then advertise it, it would not be deductible as the property wasn't available for, or producing, income at the time the maintenance was completed.

    On the flip side, if the property is rented and the tenants move out and repairs are completed prior to moving in yourself, even if the repairs are completed as a result of the tenant wear and tear or damage, the maintenance is also not tax deductible - although Income Tax (IT) ruling 180 does make a concession for this eventuality in certain cases.

    A little known fact is that you don't necessarily have to have paid for allowable maintenance to make it deductible, you must have just committed to the expenditure and accepted liability i.e accepted a quote and instructed the work to commence. This is useful around EOFY where you can book maintenance prior to June 30th and still claim it, even if you plan to pay for it after the the EOFY.

    Remember, not all maintenance is tax deductible with the general rule being that if you are repairing an item e.g. the stove, back to its original state it's a deduction. If it's a replacement or repairing it beyond its original condition, it's an improvement. Again, this can be grey as evidenced in ID 2002/330 vs. ID 2001/30.

    At the end of the day, always seek appropriate tax advice from your accountant prior to making any tax related decision as it's essentially impossible to undo once you've done it!

    Hope that's been of some help :)

    - Andrew
    Last edited: 17th Oct, 2016
    D.T., House, Colin Rice and 1 other person like this.
  4. fullylucky

    fullylucky Well-Known Member

    27th Jun, 2015

    Watch this video and everything will be clear.
    Colin Rice likes this.
  5. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

    9th Jul, 2015
    @Darlinghurst Boy appoint a PM and start advertising for a tenant and then do the repairs and should be tax deductible then but as already mentioned clarify with your accountant to cover all bases.
    Perthguy likes this.