Timing of renovation costs

Discussion in 'Accounting & Tax' started by Burramys, 9th Mar, 2020.

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  1. Burramys

    Burramys Well-Known Member

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    I'm nearing the end of a renovation. The property has not been rented before by me, and will hopefully soon be on the rental market. After that date Taxation Ruling 2004/4 citing Steele's case applies, and any costs are allowed deductions. For example, if a rate notice is paid after the IP is on the rental market, that is an allowed deduction.

    Renovation costs have been paid as they fell due. However, some will be paid after the IP is on the rental market. I cannot find a reference to show if these payments are allowed deductions. Advice on this point would be valued. TIA.
     
  2. Player

    Player Well-Known Member

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    They sound like capital items anyway. Even if some of these reno items were initial repairs pre-letting they would likely need to be capitalised and are unlikely to be allowed as a straight out deduction.
     
  3. Ross Forrester

    Ross Forrester Well-Known Member

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    Renovation costs are capital in nature even if the property is rented at the same time the renovation is going on. They might be eligible for building allowance and I recommend a quantity survey to give tax advice on this.

    Initial repairs are capital in nature and not tax deductible. - Law Shipping
     
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  4. Burramys

    Burramys Well-Known Member

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    Damn, I knew this! I do not buy or renovate IPs that often, and forgot about ongoing (rates, LL insurance, water, etc) vs capital items (paint, plumbing, new helipad). All good. I'm keen to claim what I can, and always seek to comply with tax laws, or any others for that matter. Maybe I should start buying shares. Quintex and Pasminco were good when I last looked.
     
  5. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    Rates which are paid on the settlement sheet as an adjustment or after settlement where the property is intended to produce future rental income when available for rent would be fully deductible when paid. (Steele's) However since 1 July 2019 a newly constructed property or a substantially renovated property may have limits on all deductions which only occur at the later of
    1. Having a occupancy cert; and
    2. Being available for rental