Repairs and maintenance are tax-deductible expenses, yet improvements to the property or capital works or replacement of items are not tax deductible.
Deductions claimed for repairs, and maintenance are an area that the Tax Office always looks closely at, so it’s important to understand the rules. An area of major confusion is the difference between repairs and maintenance and capital works. While repairs and maintenance can be claimed immediately, the deduction for capital works is generally spread over a number of years.
Repairs must relate directly to the wear and tear resulting from the property being rented out. This generally involves a replacement or renewal of a worn out or broken part – for example, replacing damaged palings of a fence or fixing a broken toilet.
The following expenses will not qualify as deductible repairs but are capital:
- Replacement of an entire asset (for example, a complete fence, a new hot water system, an oven, replacing a shower curtain with a glass wall, etc.)
- Improvements and extensions.
Also, remember that any repairs and maintenance undertaken to fix problems that existed at the time the property was purchased are not deductible.
Should you require further information in relation to taxation and investment property, please feel free to contact Peter Quinn by submitting an enquiry or calling us on +61 2 9580 9166 to book an obligation-free appointment.
The information in this document does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. It is important that your personal circumstances are taken into account before making any financial decision and it is recommended that you seek assistance from your financial adviser.