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The cost of repairs and maintenance may be deductible in full in the year you incur them if both –
•the expense directly relates to wear and tear or other damage that occurred while renting out the property
•the property either –
– continues to be rented on an ongoing basis
– remains available for rent, but there’s a short time when the property is unoccupied (for example, where unseasonable weather causes cancellations of bookings or all reasonable efforts to attract tenants were unsuccessful).
Repairs
Generally, repairs must relate directly to wear and tear or other damage that occurred while renting out the property and can be claimed in full in the same year you incurred the expense.
Examples of repairs include:
•replacing broken windows
•repairing electrical appliances or machinery
•replacing part of the guttering damaged in a storm
•replacing part of a fence damaged by a falling tree branch.
Maintenance
Maintenance generally involves keeping your property in a tenantable condition. It includes work to prevent deterioration or to fix existing deterioration.
Examples of maintenance include:
•repainting faded or damaged interior walls
•oiling, brushing or cleaning something that is otherwise in good working condition (for example, oiling a deck or cleaning a swimming pool)
•maintaining plumbing.
Capital expenditure that may be claimable over time.
Capital allowances
Depreciating assets are items that can be described as plant, which don’t form part of the premises. These items are usually:
•separately identifiable
•not likely to be permanent and expected to be replaced within a relatively short period
•not part of the structure.
When claiming a deduction for decline in value for each asset, you can choose to use either:
•the effective life the Commissioner has determined for these types of assets
•your own reasonable estimate of its effective life.
Where you estimate an asset’s effective life, you must keep records to show how you worked it out.
Examples of assets decline in value include:
•floating timber flooring
•carpets
•curtains
•appliances like a washing machine or fridge
•furniture.
Capital works
Capital works describes certain kinds of construction expenditure used to produce income. The rate of deduction for these expenses is generally 2.5% per year for 40 years following construction.
Capital works include:
•building construction costs
•the cost of altering a building
•major renovations to a room
•adding a fence
•building extensions such as garages or patios
•adding structural improvements like a driveway or retaining wall
This only a short guide to possible gains – please contact us for a more tailored approach to your specific needs.
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