Claimable Renovations?

W

WebBoard

Guest
From: Fiona W


Hi,

We are in the process of renovating a unit in Melbourne in preparation for selling. We aren't doing the renos for a tax break, but are just curious as to whether we can claim the renovation costs as repairs, even though our tenant has just vacated. She had been there for 10 1/2 years, so wasn't really on a lease, more a month by month thing. We've received different opinions, so would like to try and clear this up!

Thanks.
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 1
From: H T


The thing that has to be proven is whether it is capital in nature, ie its adding to the original condition of the asset while it was used for income producing circumstances . IF it does it is not deductable. Section 53 allows for a deduction for expenditure on repairs only. Even if it is a repair to an item damaged by a tenant, you can only improve the original item as was used in its income producing time. If you improve it, then it will be viewed as capital in nature and not allowed as a deduction.

If the modification is restoring it to its original condition, then it can be claimed as a deduction.

sorry if this is not clear, i wrote this in a hurry..

HT
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 1.1
From: Megan Reimers


I am a newbie too but my question is if you are selling the property and the renovations do not fall under the veil of repairs then doesn't this mean you can claim any reno costs against the capital gain's tax you will have to pay when you sell the property for a profit? So either way technically you should be able to claim yours costs it just a matter of how...have I got it right??? not sure just thinking out loud or on the forum so to speak!!!
Megs
 
Last edited by a moderator:
Reply: 1.1.1
From: Dale Gatherum-Goss


Hi

Yes, Megan, you are right. Any money spent that you cannot claim as an outright tax deduction can be used to reduce the capital gain.

Dale
 
Last edited by a moderator:
Reply: 2
From: Dale Gatherum-Goss


Hi

It will actually depend upon what you are doing and whether the nature of the work is a repair to an item to restore the unit to it's original position - in which case the money spent is a tax deduction

or

whether you are improving on the asset which will then make the money spent a capital cost that Megan rightfully suggested could reduce your capital gain.

These facts are so regardless of whether or not you intend to relet the unit or sell it as the damage was incurred whilst the unit produced income.

Good luck and I hope that this helps

Dale
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 2.1
From: Fiona W


Thanks people. I had no idea I could do anything with the capital gains thing! You learn something new every day!
 
Last edited by a moderator:
Reply: 2.2
From: Robert Forward


Dale

A further question for you.

What is the deductibility for improvements "BEFORE" settlement. So if I'm buying a property with an agreement with the vendor for access to the site before settlement to value add. Are these improvements classed as capital work in nature or can I then use a depreciation schedule on this??

Cheers
Robert

The Sydney "Freestylers" Group Leader.
 
Last edited by a moderator:
Reply: 2.2.1
From: Dale Gatherum-Goss


Hi Robert!

I'm afraid that improvements before you settle are not tax deductible, but, can be depreciated under Capital works.

The same applies for anything major that you do within the first year of ownership as the tax office argue that you are merely restoring the unit to its proper value and not repairing damage.

I hope that this helps.

Dale
 
Last edited by a moderator:
Reply: 2.2.1.1
From: Owen .


Dale,

What is the ruling on kitchen cabinets? I have heard a couple of versions of how they are depreciated from quantity surveyors, some say they are part of the building (ie 2.5% for 40 years), other depreciate over 5 or 10 years. What is your take on this?

Also what if the cabinets are free standing like the new Ikea kitchens. Except for the plumbing, nothings permanent so they can be removed at any time. How do you think these would be treated?

Owen

"Gambling promises the poor what property performs for the rich – something for nothing"
 
Last edited by a moderator:
Reply: 2.2.1.2
From: Robert Forward


Thanks Dale.

I thought that was the case, just wanted it cleared up.

Cheers
Robert

The Sydney "Freestylers" Group Leader.
 
Last edited by a moderator:
Reply: 2.2.1.2.1
From: Dale Gatherum-Goss


HI Owen!

A lot will depend upon the kitchen itself. If the kitchen is fixed to the house, then it should form part of the building and be written off at 2.5% over 40 years.

However, freestanding kitchens are a different matter again and can be depreciated over it's effective life.

I rely on the QS to get this right as I'm not usually allowed into the kitchen except to do the dishes. After all, they are meant to be experts and they do have professional indemnity insurance.

Have fun

Dale
 
Last edited by a moderator:
Reply: 2.2.1.2.1.1
From: Rolf Latham


Hi Dale

One could read your post that you are not allowed into the kitchen unless you have PI if you are doing more than the dishes.

Maybe its just my sick sense of humour, but man you must be a bad cook to require PI :eek:)

Ta

Rolf
Rolf
 
Last edited by a moderator:
Reply: 2.2.1.2.1.1.1
From: Dale Gatherum-Goss


Hi Rolf!

Touche!!!! I remember having a dig at one of your posts a little while ago and so I, more than most, really appreciated that. Thank you!

Would you believe that I actually wanted to be a chef and that my school teachers virtually forced me into accounting? I guess I am lucky, it could have been sewer maintenance!

Have a great day, Rolf, you've made mine much more pleasant already.

Dale
 
Last edited by a moderator:
Top