Early this year (before June 2010), tenants have moved out of my unit. Different
tenants have continuously been in the unit for more than 10 years - I have never lived there.
All of the wear and tear and 'damage' has happened when tenants have been in there.
I won't be renting it out any more. I will either move in, or sell it.
I'm not yet sure which - please let me know if it makes any difference to what I can claim below.
I have read and researched a lot until I was blue in the face (including reading
past Somersoft posts), but can't really find (m)any explicit examples showing what you can
claim right after you've stopped renting the unit.
I am in the process of renovating the whole unit. Because most the unit is in a bad state by now,
I found it necessary to replace most things rather than 'repairing' them.
It will cost a lot of money, but because I'm mostly 'replacing' rather than 'repairing',
and I won't be renting it any more, I'm getting the impression from the tax laws that I won't
be able to claim much tax relief at all, even though the tenants did the damage?
--------------------------
1) Repairs and Maintenance
--------------------------
For things which are genuine "repairs" and "maintenance" under ATO's definitions,
the Rental Properties 2010 booklet p12 and example 12 seem to be saying that
I can deduct the repairs as long as I do the repairs in the same income year as
when the property was last available for rent (i.e. that I can claim repair expenses
up to 30/6/2010). That means I can't claim any repair at all from 1/7/2010 onwards?
Is that right? It sounds a bit strange to me that it depends on the exact date the
tenants move out. What if someone's tenants move out just before 30th June
(and the property won't be rented any more after that) - does that mean that person
wouldn't be able to claim any "repairs" at all?
(It would make more sense to me if everyone could claim repairs within 12 months
of the tenants having moved out, not just people whose tenants move out on 1st July).
For any "repairs" I incur from July 2010 onwards, then I think I can add them to the
cost base when I sell the unit, and pay less capital gains tax then - is that right?
------------------------------------
2) Car travel expenses/accommodation
------------------------------------
The Rental Properties 2010 booklet explains how to claim car travel expenses if you
"travel to inspect or maintain your property".
- As above, will I only able to claim this up until the 30/6/2010?
- If I do a car trip, and on that day is not related to any "repairs" but is related
to "replacing" an item which is not necessarily tax deductible, can I also
claim my car travel expenses for that day?
EXAMPLE: Later below I am asking if I have any tax relief for my new kitchen replacement.
IF I don't, am I still able to claim my car trips which are related to that?
- For those car trips which I can't claim immediately, can I add them to the cost base
of the property when I sell it?
Accommodation:
While the new kitchen was being built, I stayed at a hotel nearby every night
so that I wouldn't get have to get up at extremely early hours every morning.
I took accommodation purely for that reason, and it wasn't a "holiday" in any way.
I live 40kms away from my property - that's far for me, but is it "far" enough for ATO?
Is the accommodation deductible?
From http://www.ato.gov.au/individuals/c...02/002/014/003&mnu=43443&mfp=001/002&st=&cy=1
"What overnight stay expenses can you claim?
You can claim a deduction for travel expenses for travelling to your rental property if:
* you own a rental property that is far away from where you live
* it would be unreasonable to expect you not to stay near the rental property overnight when making an inspection.
At http://www.ato.gov.au/individuals/c...02/002/014/003&mnu=43443&mfp=001/002&st=&cy=1
it shows an example of overnight stays to perform repairs on a property.
Most examples I've read about accommodation seem to deal with "flying" to the property.
Is living 40kms away by car going to be enough to claim accommodation?
----------------------
3) Asbestos inspection
----------------------
Is an asbestos *inspection* tax deductible in any way? I had an asbestos inspection
done which has detected asbestos, but I haven't decided if I will remove it yet.
(Usually you want one company to do the asbestos inspection, and a different company
to do any asbestos removal, to avoid conflict of interest.
)
The following articles deal with asbestos *removal* which I haven't done yet: does
anybody know if the same principles apply to just an asbestos *inspection*?
- http://www.propertyupdate.com.au/articles/depreciation---the-forgotten-tax-deduction.html
Download the "Secrets of Depreciation" booklet.
- http://www.brisbanetimes.com.au/mon...a-tax-deduction-minefield-20101010-16dlj.html
- Taxation Ruling TR 97/23 "Income tax: deductions for repairs"
http://law.ato.gov.au/atolaw/view.htm?docid=TXR/TR9723/NAT/ATO/00001
- ATO ID 2004/720
http://law.ato.gov.au/atolaw/view.htm?docid=AID/AID2004720/00001
----------
4) Kitchen
----------
I've replaced the whole kitchen because it's not worth repairing it - too much
severe water damage and other damage.
I believe the kitchen cupboards are a capital item, so the best one could do is to claim
capital works deduction (2.5% yearly over 40 years I believe?).
This website describes my situation almost exactly:
http://www.ato.gov.au/individuals/content.asp?doc=/content/00183233.htm
The only thing is that I assume that person's property is still available for rent,
but mine is not.
Because I will no longer be renting out the property, does that mean that I
CAN'T claim this capital works deduction at all?
That sounds very unfair - the tenants did so much damage to the whole unit
that it's necessary to replace items rather than repair them. But is that just how
the tax laws are?
Let me know if there's any way I can pay less tax against that.
In many of the other units in the block, the original kitchens etc. are mostly
in great condition because the tenants have taken good care of them - it was
the tenants which did the damage in mine through neglect.
In addition, I don't think the new kitchen is an "improvement" - it's new,
but it doesn't add anything that wasn't that before.
If I can't claim anything right now, then I think I can add the above costs to the
cost base when I sell the unit, and pay less capital gains tax then - is that right?
----------------------------------
5) Kitchen appliances (oven, etc.)
----------------------------------
My understanding is that new kitchen appliances (like oven, rangehood, cooktop)
can be claimed as depreciating assets. This is shown in the same URL as above i.e.
http://www.ato.gov.au/individuals/content.asp?doc=/content/00183233.htm
and in the Rental Properties 2010 booklet it shows that ovens/rangehoods/cooktops
all have an effective life of 12 years.
But again, can I actually claim these given that my property won't be rented any more?
(The above seems clear, but one thing confuses me about things like stoves and refrigerators :
The Rental Properties 2010 booklet p12 says this:
"However, the following expenses are capital, or of a capital nature, and are not deductible:
- replacement of an entire structure or unit of property (such as a
complete fence or building, a stove, kitchen cupboards or refrigerator)
....
You may be able to claim capital works deductions for these expenses – for more information,
see Capital works deductions on page 19."
This seems to be saying that for new stoves and fridges, you can only
claim a "capital works deduction" (i.e. 2.5% yearly over 40 years). This sounds
wrong to me?
The URL above i.e.
http://www.ato.gov.au/individuals/content.asp?doc=/content/00183233.htm
seems clear that these items are depreciating assets with an effective life,
and not "capital works deductions".
Otherwise, why would the same Rental Properties booklet explicitly list them as
having an effective life of 12 years if you can never use that?
If you look at Taxation Ruling TR 97/23 "Income tax: deductions for repairs"
http://law.ato.gov.au/atolaw/view.htm?docid=TXR/TR9723/NAT/ATO/00001
it says the following, but I'm still just as confused.
Is it trying to make a point of free-standing vs fixed stoves??
"33. The cost of replacing things such as free-standing stoves,
refrigerators and furniture in premises used for income purposes is
capital expenditure and is not deductible under section 25-10. (Note,
however, that these items (if they are not permanent fixtures) are plant
on which depreciation is allowable: see Taxation Ruling IT 242.)"
)
--------
6) Tools
--------
I have specifically bought a number of new tools to keep at the property
to perform repairs, e.g. a drill, hammer, etc.
All of these are individually under $300.
Can I claim these as a deduction? I am using them to perform repairs now,
but of course in the future I will continue using them for general
non-income-producing purposes, and the property is no longer available for rent.
tenants have continuously been in the unit for more than 10 years - I have never lived there.
All of the wear and tear and 'damage' has happened when tenants have been in there.
I won't be renting it out any more. I will either move in, or sell it.
I'm not yet sure which - please let me know if it makes any difference to what I can claim below.
I have read and researched a lot until I was blue in the face (including reading
past Somersoft posts), but can't really find (m)any explicit examples showing what you can
claim right after you've stopped renting the unit.
I am in the process of renovating the whole unit. Because most the unit is in a bad state by now,
I found it necessary to replace most things rather than 'repairing' them.
It will cost a lot of money, but because I'm mostly 'replacing' rather than 'repairing',
and I won't be renting it any more, I'm getting the impression from the tax laws that I won't
be able to claim much tax relief at all, even though the tenants did the damage?
--------------------------
1) Repairs and Maintenance
--------------------------
For things which are genuine "repairs" and "maintenance" under ATO's definitions,
the Rental Properties 2010 booklet p12 and example 12 seem to be saying that
I can deduct the repairs as long as I do the repairs in the same income year as
when the property was last available for rent (i.e. that I can claim repair expenses
up to 30/6/2010). That means I can't claim any repair at all from 1/7/2010 onwards?
Is that right? It sounds a bit strange to me that it depends on the exact date the
tenants move out. What if someone's tenants move out just before 30th June
(and the property won't be rented any more after that) - does that mean that person
wouldn't be able to claim any "repairs" at all?
(It would make more sense to me if everyone could claim repairs within 12 months
of the tenants having moved out, not just people whose tenants move out on 1st July).
For any "repairs" I incur from July 2010 onwards, then I think I can add them to the
cost base when I sell the unit, and pay less capital gains tax then - is that right?
------------------------------------
2) Car travel expenses/accommodation
------------------------------------
The Rental Properties 2010 booklet explains how to claim car travel expenses if you
"travel to inspect or maintain your property".
- As above, will I only able to claim this up until the 30/6/2010?
- If I do a car trip, and on that day is not related to any "repairs" but is related
to "replacing" an item which is not necessarily tax deductible, can I also
claim my car travel expenses for that day?
EXAMPLE: Later below I am asking if I have any tax relief for my new kitchen replacement.
IF I don't, am I still able to claim my car trips which are related to that?
- For those car trips which I can't claim immediately, can I add them to the cost base
of the property when I sell it?
Accommodation:
While the new kitchen was being built, I stayed at a hotel nearby every night
so that I wouldn't get have to get up at extremely early hours every morning.
I took accommodation purely for that reason, and it wasn't a "holiday" in any way.
I live 40kms away from my property - that's far for me, but is it "far" enough for ATO?
Is the accommodation deductible?
From http://www.ato.gov.au/individuals/c...02/002/014/003&mnu=43443&mfp=001/002&st=&cy=1
"What overnight stay expenses can you claim?
You can claim a deduction for travel expenses for travelling to your rental property if:
* you own a rental property that is far away from where you live
* it would be unreasonable to expect you not to stay near the rental property overnight when making an inspection.
At http://www.ato.gov.au/individuals/c...02/002/014/003&mnu=43443&mfp=001/002&st=&cy=1
it shows an example of overnight stays to perform repairs on a property.
Most examples I've read about accommodation seem to deal with "flying" to the property.
Is living 40kms away by car going to be enough to claim accommodation?
----------------------
3) Asbestos inspection
----------------------
Is an asbestos *inspection* tax deductible in any way? I had an asbestos inspection
done which has detected asbestos, but I haven't decided if I will remove it yet.
(Usually you want one company to do the asbestos inspection, and a different company
to do any asbestos removal, to avoid conflict of interest.
)
The following articles deal with asbestos *removal* which I haven't done yet: does
anybody know if the same principles apply to just an asbestos *inspection*?
- http://www.propertyupdate.com.au/articles/depreciation---the-forgotten-tax-deduction.html
Download the "Secrets of Depreciation" booklet.
- http://www.brisbanetimes.com.au/mon...a-tax-deduction-minefield-20101010-16dlj.html
- Taxation Ruling TR 97/23 "Income tax: deductions for repairs"
http://law.ato.gov.au/atolaw/view.htm?docid=TXR/TR9723/NAT/ATO/00001
- ATO ID 2004/720
http://law.ato.gov.au/atolaw/view.htm?docid=AID/AID2004720/00001
----------
4) Kitchen
----------
I've replaced the whole kitchen because it's not worth repairing it - too much
severe water damage and other damage.
I believe the kitchen cupboards are a capital item, so the best one could do is to claim
capital works deduction (2.5% yearly over 40 years I believe?).
This website describes my situation almost exactly:
http://www.ato.gov.au/individuals/content.asp?doc=/content/00183233.htm
The only thing is that I assume that person's property is still available for rent,
but mine is not.
Because I will no longer be renting out the property, does that mean that I
CAN'T claim this capital works deduction at all?
That sounds very unfair - the tenants did so much damage to the whole unit
that it's necessary to replace items rather than repair them. But is that just how
the tax laws are?
Let me know if there's any way I can pay less tax against that.
In many of the other units in the block, the original kitchens etc. are mostly
in great condition because the tenants have taken good care of them - it was
the tenants which did the damage in mine through neglect.
In addition, I don't think the new kitchen is an "improvement" - it's new,
but it doesn't add anything that wasn't that before.
If I can't claim anything right now, then I think I can add the above costs to the
cost base when I sell the unit, and pay less capital gains tax then - is that right?
----------------------------------
5) Kitchen appliances (oven, etc.)
----------------------------------
My understanding is that new kitchen appliances (like oven, rangehood, cooktop)
can be claimed as depreciating assets. This is shown in the same URL as above i.e.
http://www.ato.gov.au/individuals/content.asp?doc=/content/00183233.htm
and in the Rental Properties 2010 booklet it shows that ovens/rangehoods/cooktops
all have an effective life of 12 years.
But again, can I actually claim these given that my property won't be rented any more?
(The above seems clear, but one thing confuses me about things like stoves and refrigerators :
The Rental Properties 2010 booklet p12 says this:
"However, the following expenses are capital, or of a capital nature, and are not deductible:
- replacement of an entire structure or unit of property (such as a
complete fence or building, a stove, kitchen cupboards or refrigerator)
....
You may be able to claim capital works deductions for these expenses – for more information,
see Capital works deductions on page 19."
This seems to be saying that for new stoves and fridges, you can only
claim a "capital works deduction" (i.e. 2.5% yearly over 40 years). This sounds
wrong to me?
The URL above i.e.
http://www.ato.gov.au/individuals/content.asp?doc=/content/00183233.htm
seems clear that these items are depreciating assets with an effective life,
and not "capital works deductions".
Otherwise, why would the same Rental Properties booklet explicitly list them as
having an effective life of 12 years if you can never use that?
If you look at Taxation Ruling TR 97/23 "Income tax: deductions for repairs"
http://law.ato.gov.au/atolaw/view.htm?docid=TXR/TR9723/NAT/ATO/00001
it says the following, but I'm still just as confused.
Is it trying to make a point of free-standing vs fixed stoves??
"33. The cost of replacing things such as free-standing stoves,
refrigerators and furniture in premises used for income purposes is
capital expenditure and is not deductible under section 25-10. (Note,
however, that these items (if they are not permanent fixtures) are plant
on which depreciation is allowable: see Taxation Ruling IT 242.)"
)
--------
6) Tools
--------
I have specifically bought a number of new tools to keep at the property
to perform repairs, e.g. a drill, hammer, etc.
All of these are individually under $300.
Can I claim these as a deduction? I am using them to perform repairs now,
but of course in the future I will continue using them for general
non-income-producing purposes, and the property is no longer available for rent.