Ducted heating duct replacement - expense or depreciation

After having a service on my ducted heating unit, it seems as if an animal, namely my partners dog, has destroyed or at least pierced most of the ducts under the house. A quote has come back of $2135 to replace :(

Now, my initial thoughts are that this must be depreciated as its a replacement not a repair of the existing ducts

However, would the ATO view the ducts separate from the actual unit and therefore a replacement and depreciable. Or would they view ducts and the actual heating unit as one item and therefore the cost of the ducts is repairing this 'one' item and therefore an expense?
 
They see the ducts as 'building'. Surely some of the existing ducting can be retained? If so, you could be in repair (100%) territory as opposed to 2.5% territory.
 
Apart from the fact that it is capital works ...

"MY ducting unit" ... "PARTNER'S dog" ... "under THE house" ...

This seems to suggest your, or your partner's, PPOR ?
 
Yes, should have clarified. It is damage done to my PPOR whilst living there but only identified and diagnosed the issue after it was rented when the tenants were asking about differential in the hot air from various parts of the house.
 
Yes, should have clarified. It is damage done to my PPOR whilst living there but only identified and diagnosed the issue after it was rented when the tenants were asking about differential in the hot air from various parts of the house.

That's a pretty important piece of information - so the damage was present BEFORE you started renting the unit ... You seriously think you could class this as a repair i.e. fair wear & tear whilst earning assessable income?

Can be added to the building write-off @ 2.5% though.
 
I'm not an accountant but I believe this could justifiably be argued as a repair with the cost claimed in the same FY. Reason being is that whilst the replacement ducting might be new the functionality of the aircon as a system has not significantly changed.

It is all in the intent and reasoning behind the issue, so check with your own accountant or make your own assessment.

Refer to http://law.ato.gov.au/atolaw/view.ht.../nat/ato/00001

Extract from TR 97/23

Repair is distinct from improvement

44. The meaning of 'repair' or 'repairs' is considered in paragraphs 12 to 30 of this Ruling. In the case of a 'repair', broadly speaking, the work restores the efficiency of function of the property without changing its character. An 'improvement', on the other hand, provides a greater efficiency of function in the property - usually in some existing function. It involves bringing a thing or structure into a more valuable or desirable form, state or condition than a mere repair would do. Some factors that point to work done to property being an improvement include whether the work will extend the property's income producing ability, significantly enhance its saleability or market value or extend the property's expected life.

45. To distinguish between a 'repair' and an 'improvement' to property, one needs to consider the effect that the work done on the property has on its efficiency of function. This is the determinative test.

46. If the work entails the replacement or restoration of some defective, damaged or deteriorated part of the property, one does not focus on the effect the work has on the efficiency of function of the part . That is not determinative of whether the property is repaired or improved. It is a relevant factor to take into account, however, in considering the effect of the work on the property's efficiency of function. It is possible, for instance, that the replacement of a subsidiary part of property with a part better in some ways than the original is a repair to the property without the work being an improvement to the property.
 
Yet another "is my capital expenditure deductible?" question.
So many variations to the same question. Hoping a wishing wont change it.
 
Joe, regardless of the nature of the work, it's not a 'repair' because the damage occurred while the property was being used as a PPOR.

Oops, I missed that very important bit about it being a PPOR and agree entirely with your point!:rolleyes:


...............however, if the repair has not yet been done and the property is now being used as an income producing property, who would know or be able to dispute this ...............?

After all, responsibility rests with the OP as it is self assessment.
 
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