13 Sep Investment Properties – When Is A Repair An Improvement?
We All Count Partner Shaun Williams explains how to tell whether your Investment Property repair is General Maintenance or a Property Improvement.
When claiming repairs and maintenance on an investment property, investors need to be aware of the difference between general maintenance and property improvements. The Australian Taxation Office (ATO) allows a 100% deduction in the year the expense incurred for general repairs and maintenance; while improvements to the asset must be depreciated (i.e. the value is written off over the useful life of the asset).
Fortunately the ATO provides clear definitions on what is considered a repair or maintenance and what is a capital improvement.
A Repair is considered anything that is done to fix damage or deterioration of a property, for example – replacing part of a fence that is broken during a storm. Maintenance is any work that is completed to prevent damage, such as oiling a deck or cleaning a carpet. Both of these expenses are 100% tax deductible when the expense occurs according to the ATO.
However; if the fence was removed and replaced with a new fence, if the entire carpet was replaced or a new deck built, these expenses fall into the category of capital improvements and would need to be depreciated over a number of years.
A tax depreciation schedule obtained from a specialist quantity surveyor can identify items that are an improvement or a repair. The surveyor will also produce a report to assist with the claiming of depreciation, which is a great way to claim an expense each year on your rental property.
If you are unsure whether your expenses are repairs or improvement or want to enquire about a tax depreciation report, the team at We All Count are always happy to help. Contact us on 08 8531 0577 or firstname.lastname@example.org.
Partner – Murray Bridge