Bathroom Work & Tax

[rabidz]

Bought an IP in around 8 months ago (an old 1970's building strata).

Tenants reported there is water leakage in the bathroom and also affected some hallway carpet area (become wet). After a consultation with some "bathroom contractors", it seems all the tiles area need to be changed (which is almost 75% of the bathroom, so it's kinda semi-renovation). It's going to cost roughly about 8000.

I'm not sure whether this can be categories as "repair/maintenance" or "improvement", since the property just been bought around 8 months ago.
When purchased, I organised the building inspection, but it's all good (around 1970's building).

My question:
1. Can I assume this:
a. As a repair/maintenance? (so I can deduct the cost immediately for my tax return)
or
b. Is this an improvement? (so the only thing I can claim the cost is via depreciation)?

2. I'm planning to use my Line Of Credit (LOC) to fund this work.
a. Can I claim the interest of the 8000 for my tax return as deduction?
b. Do I have to split these 8000 from my LOC, so it's more accountable for ATO to check/audit (honestly, I don't want to split it again, since my LOC already have 4 split accounts). Any idea to get around this loan?

Can someone please help/advise?
Thanks. Much appreciated.

 

[rabidz]

Hi All,

Can anyone please help or advice?
Thank you. Much appreciated.

 

[depreciator]

To claim the work as 'repairs', you need to be sure the problem happened AFTER you started to rent out the property. Having a building report that did not mention this issue is useful. But an $8,000 repair claim 8 months after settlement is pretty ambitious - especially as you will likely be taking the opportunity to update the whole bathroom i.e. you will be 'improving' it.

Do you know where the leak is? Do it really require ripping out the whole bathroom to deal with it? I would be getting a second opinion.

 

[rabidz]

To claim the work as 'repairs', you need to be sure the problem happened AFTER you started to rent out the property. Having a building report that did not mention this issue is useful. But an $8,000 repair claim 8 months after settlement is pretty ambitious - especially as you will likely be taking the opportunity to update the whole bathroom i.e. you will be 'improving' it.

Do you know where the leak is? Do it really require ripping out the whole bathroom to deal with it? I would be getting a second opinion.

Thanks for this.
I've asked 3 quotes for this, and you are correct. Some of the quotes are around 4000-5000. I think I have to change all the tiles & shower screen, so I don't have to do more work in the future (an opportunity to update the bathroom).
So, based on your information, I think I will have to claim it through depreciation.

Any comments about the "finance" side, as below ?

2. I'm planning to use my Line Of Credit (LOC) to fund this work.
a. Can I claim the interest of the 8000 for my tax return as deduction?
b. Do I have to split these 8000 from my LOC, so it's more accountable for ATO to check/audit (honestly, I don't want to split it again, since my LOC already have 4 split accounts). Any idea to get around this loan?

Can someone please help/advise?
Thanks. Much appreciated.