?Available for Rent? Tax Ded Question

[Cards]

Hi Guys,

Just wondered if anyone has any info on this?
I've just purchased an IP property & I'm planning on renovating the bathroom - Around 5k.
The property isn't advertised for rent as yet, because I think I the bathroom needs replacing before I rent the house out to maximise the rent & increase its demand.
I plan on demolishing the old bathroom and obtaining a scraping depreciation schedule + another diminishing depreciation schedule after for the new bathroom.
I already have a PPOR and the new property was always going to be an IP.

Question: Will I still be able to claim deductions even though the property isn't available for rent?

 

[D.T.]

Deductions while its available to rent : yes
Deductions whilst being renovated : no

 

[DaveM]

Any work you do after purchase but before renting is an initial repair and not deductible. It is capital in nature and gets depreciated.

 

[wylie]

Put up an advert for rent at the price you want once renovated.

If people cannot see how it will look renovated, then you've lost nothing.

I'm guessing this would all be done in a couple of weeks?

 

[GreyGhost]

Any work you do after purchase but before renting is an initial repair and not deductible. It is capital in nature and gets depreciated.

Question was can he claim interest etc while not available for rent. Not treatment of reno costs

 

[D.T.]

Question was can he claim interest etc while not available for rent. Not treatment of reno costs

Not a reading expert?

 

[BMT Tax Depreciation]

I plan on demolishing the old bathroom and obtaining a scraping depreciation schedule + another diminishing depreciation schedule after for the new bathroom.

Question: Will I still be able to claim deductions even though the property isn't available for rent?

You'll be able to claim depreciation for sure.

I'm more concerned about whether you've already got a depreciation schedule for the place (or are planning on getting one before the renovation). You won't be able to scrap assets if a QS doesn't value them before you get rid of them.

 

[Paul@PFI]

Hi Guys,

Just wondered if anyone has any info on this?
I've just purchased an IP property & I'm planning on renovating the bathroom - Around 5k.
The property isn't advertised for rent as yet, because I think I the bathroom needs replacing before I rent the house out to maximise the rent & increase its demand.
I plan on demolishing the old bathroom and obtaining a scraping depreciation schedule + another diminishing depreciation schedule after for the new bathroom.
I already have a PPOR and the new property was always going to be an IP.

Question: Will I still be able to claim deductions even though the property isn't available for rent?

When the property is available for rent the QS report should use that date as the start date. The initial repairs / reno etc can incorporate the costs incurred. No its not deductible. Also you cant scrap either.

Worth discussing with a QS to have the schedule correctly prepared.

 

[BMT Tax Depreciation]

Also you cant scrap either.

Of course. I forgot about the fact that there was no pre-renovation income period.

 

[DaveM]

Question was can he claim interest etc while not available for rent. Not treatment of reno costs

I dont see any mention of interest in the OP, but plenty of mention of capital works?

 

[Propertunity]

What's the problem with advertising it for rent immediately after settlement? Put up a For Lease sign straight away as well.

Most tenants do not want immediate possession as they need to give 2-3 weeks notice where they are currently anyway. A bathroom Reno only takes 1 week.

Does this solve the problem?

 

[dan c]

Hi Guys,

Just wondered if anyone has any info on this?
I've just purchased an IP property & I'm planning on renovating the bathroom - Around 5k.

Question: Will I still be able to claim deductions even though the property isn't available for rent?

Sounds to me like an initial repair, which would have to be depreciated.

 

[Cards]

Thanks for the info gents!

I don't have a current depreciation schedule.

So, the best way to go about this would be:

1: Make the IP available for rent first.
2: Demo the bathroom.
3: Get a scrapping schedule - QS.
4: Install the new bathroom.
5: Get a diminishing schedule - QS.

 

[BMT Tax Depreciation]

Thanks for the info gents!

I don't have a current depreciation schedule.

So, the best way to go about this would be:

1: Make the IP available for rent first.
2: Demo the bathroom.
3: Get a scrapping schedule - QS.
4: Install the new bathroom.
5: Get a diminishing schedule - QS.

No. To scrap the bathroom we need to see it before you demolish it. Otherwise, how would we value it?

It also bears mentioning that, depending on the age, there might not be much to scrap in the bathroom (they are primarily capital works assets). How old is the house/bathroom? Anything else you're planning on replacing?

To rearrange your priorities:

1: Make the IP available for rent first.
2: Get a depreciation schedule.
3: Demo the bathroom.
4: Install the new bathroom.
5: Get a scrapping schedule and updated depreciation schedule.

More of a discussion about what you're planning to do would be recommended first, though.

 

[Cards]

Hi Chris thanks for the advice, its much appreciated!

The house was built in 1976 so not much dep on that part, & I'm planning on replacing the flooring in the entire house & furnishing.

 

[BMT Tax Depreciation]

The house was built in 1976 so not much dep on that part, & I'm planning on replacing the flooring in the entire house & furnishing.

Okay, that's helpful. In an old bathroom there are only a few small-ish items that would be scrappable, assuming the existing capital works there date back a few decades.

In that case, the focus now shifts to the flooring: what sort of flooring is/was there and what are you replacing it with? (Apologies if that has been covered; I had a quick scroll up and couldn't see it.)

Again, there should also be a demonstrable intent to make the property available for income prior to any scrapping. However, what this actually entails differs depending on whom you ask.

 

[Cards]

Its currently fully tiled but my intention is not to rip the tiles up, just lay hardwood over the top - A lot of tiles are cracked & i don't have like for like replacements.

Are there any other ways i can prove my "intent" without advertising the property for rent? ie... I already own a PPOR / Land lord building insurance start date?
I would prefer to stage the property & complete all works before the photos are taken to maximise tenant interest & lease appraisals from REA's.

 

[BMT Tax Depreciation]

Its currently fully tiled but my intention is not to rip the tiles up, just lay hardwood over the top - A lot of tiles are cracked & i don't have like for like replacements.

It really doesn't sound much like you've got much that's scrappable. Tiles are capital works and won't count (doubly so, given that you're not removing them). Seems like you'd only be looking at a couple of minor items at most.

Are there any other ways i can prove my "intent" without advertising the property for rent? ie... I already own a PPOR / Land lord building insurance start date?
I would prefer to stage the property & complete all works before the photos are taken to maximise tenant interest & lease appraisals from REA's.

Alas, I cannot help you there but I'm sure there are a lot of opinions floating around on this forum.

 

[Paul@PFI]

I say its not available for rent but given the potential deductions amount to Nil its not a issue. Breathe, move on.

 

[perthguy]

It's funny what people do to try to get around the 'available for rent' requirement. My brother just finished a duplex in Melbourne but it did not have an occupancy certificate yet. While he was waiting for that he advertised the property for rent with a ridiculous price with the idea that he could start claiming interest from the date of advertising but would not actually get a tenant. The funny thing is that he got a suitable application at the 'ridiculous' price and has accepted the tenant to move in once the occupancy certificate is issued.

Personally, I think someone could run into problems if they claimed a property was genuinely available for rent but the advertised price was well above market price.