Capital Expenditure Question

[gad]

I bought an IP in Sep. 2002, which needed a couple of sumps, some agi pipe work & a complete re-mortaring of the roof tiles done.
Being relatively new to IP's & from what I had read, I believed that these "repairs" were of a capital nature & the costs would only be deductible, tax wise, upon the sale of the property.

In the current API magazine, page 83 & 84 in the case study given by James Hannah (Initial repairs) he says that these "repairs" would be treated as Capital Expenditure which could be claimed at 2.5% over 40 years.
Then on page 90 Victoria Lakis in point 2 of her Checklist of common allowable deductions say's that "as opposed to improvements which are capital in nature and non-deductible until the property is sold".

Could some one clarify this for me please? Should I have claimed the costs over 40 years or should these costs be claimed when the property is sold (if ever).

Thanks

 

[MarkB]

Gad

Though I don't know the answer to your particular question, in essence what you are asking is whether or not what you did was either a repair or a capital improvement.

In case you haven't seen them, similiar questions were raised in the threads below.

http://www.somersoft.com/forums/showthread.php?s=&threadid=10730

http://www.somersoft.com/forums/showthread.php?s=&threadid=10372

In the second thread, there is a hyperlink to an ATO publication which, on pages 11-13, has some information that may be of interest to you.

MB

 

[gad]

Thanks MB364

 

[Brenda Irwin]

Ethically, I would think that you could do a 2.5% depreciation claim per annum for 40yrs.

To dissallow this to a buy and hold investor would perhaps start a trend that required improvements would not necessarily get done until it really really really needs it and Australia may start to have substandard rentals on the market.