Deducting the cost of renos

[attrill]

Hello All

I have an older unit that I am planning on renovating then selling in a year or so. As some of the repairs will be bringing the unit back up to the condition that I bought it, I presume these will be a tax deduction. If I make improvements beyond that, would they be a depreciable item, and would any depreciation claims stop as soon as I sell the unit?

Thanks in advance.
Jerry

 

[Aimjoy]

I have an older unit that I am planning on renovating then selling in a year or so. As some of the repairs will be bringing the unit back up to the condition that I bought it, I presume these will be a tax deduction.

To claim "repairs" the property must have been "available for rent for a reasonable time". You say you "have" an older unit - so if you had just purchased it and are yet to rent it out, then your repairs will be considered a capital expense and only depreciated and not written off in this financial year. If you have had it for a while, with tenants, then the repairs will be all claimable as an expense item in the financial year that you do them.

If I make improvements beyond that, would they be a depreciable item,

They will be a capital improvement and added to the cost base and then depreciated (slowly)

and would any depreciation claims stop as soon as I sell the unit?

Well the claims will stop for you (as you no longer own the asset) but they will be available for the new owner to claim.

Aimjoy

 

[attrill]

Thankyou Aimjoy, for taking the time to reply. That has certainly cleared up a few things for me.

 

[shail]

To claim "repairs" the property must have been "available for rent for a reasonable time". You say you "have" an older unit - so if you had just purchased it and are yet to rent it out, then your repairs will be considered a capital expense and only depreciated and not written off in this financial year. If you have had it for a while, with tenants, then the repairs will be all claimable as an expense item in the financial year that you do them.

What do you mean by 'written off' ?
I have just bought my first IP and thinking of doing some reno new basin in the bathroom and a new stove top in the kitchen. Can I claim these in the tax this financial year?

how much is the "reasonable time" available for rent?

 

[depreciator]

Aimjoy means the cost can't be claimed in full in this financial year, Rather, it needs to be depreciated over time.

If you've just bought a property and are doing some renos, you will depreciate them at 2.5%pa. A cooktop you will depreciate more quickly.

how much is the "reasonable time" available for rent?

May be 'sensible' is a better word than 'reasonable'. Repairs, as stated, are all about bringing a property back to the condition it was in when you bought it. So renting a property out for 6 months and then claiming an entire internal repaint, for example, would be pushing it. You would in effect be saying that the tenant you put in did so much damage that you had to repaint the place. But agreed, that can happen. I keep condition photos at the start of a tenancy so that when I claim on repairs I can prove if asked that the damage occurred during the period when I was renting the property out.

Scott

 

[imonmyway]

so what is considered a reasonable amount of time 1 year 2 years?

 

[shail]

Thanks depreciator.