how soon after purchase can you claim on improvements?

We are about to settle on our first IP. It is pretty much right to rent it out straight away, however we have since found out that the dishwasher is broken and is only fit for the rubbish bin. How soon after the purchase can we buy a dishwasher and claim the cost on tax? I have been told 3 months and 12 months by different people.
Also does someone have to be actually renting it at the time to be able to claim?
 
You can't claim for improvements except through the building depreciation.. You can only claim for repairs to bring the IP back to the condition in which it was purchased.

However, a dishwasher is a different story. You can buy it immediately and claim depreciation on it from your tax - you don't claim it as a repair. Yes, you can install the dishwasher before the tenant moves in, which would be the preferred way to go.

Sounds as if you are a bit unsure of the difference between improvements, repairs and depreciable items. Maybe check with you accountant or read a book on investment properties which will explain it in full.
Marg
 
Bondy,

Julia Hartman, who sometimes posts on this forum has published a really excellent book that has helped me no end with such queries.

It is obtainable from her website and I would highly recommend it.

http://www.bantacs.com.au/

It's an easy read and makes things very clear.
 
I concur, Julia's book is excellent and the best $30 a property investor can spend.

There's a lot of really good free stuff on her website, although to be honest I think it's written more in accountant speak, whereas her book is written in layman's language.
 
Yep definitely confused!!! I thought you could claim the cost of buying it as well as the depreciation?

No, absolutely not.

The depreciation is simply a means of writing off the value over a number of years.
Marg
 
Hi Bondy,

When it comes to when you can start claiming depreciation, this can be the time it is available for rent as well as when it is rented!

Also, with the dishwasher, if you purchase it within a certain price range, this can fall under the low-value pool, which means more depreciation in a shorter period of time!

When you mentioned improvements, there are structural improvements which you may be able to claim. This needs to be constructed by a certain date in order for these deductions to apply!

Feel free to drop me an email to discuss further!

Regards,
Constructivity
www.constructivity.com.au
 
Hi Constructivity,

What is the value to be considered as a low-value pool? AUD$300?

Are there any references that categorise which sort of items and the length of depreciation and the rate of depreciation?

Scott
 
Ever heard of double dipping?;)

Hey it was worth a try:p

Right off to find Julia's book, sounds like it is the right thing for us, esp if it is without the accountant speak!!

Constructivity thank you for that info, I'm with MFG what is the $$ cut off point?

Another question. Hubby brought home the tax info sheet for rental properties and it says that we can claim upfront for repairs, ie repairing the dishwasher instead of replacing it, did I read/understand that right?

Hubby wants to know if we can claim paint when repainting??

Sorry for all these really basic questions, we thought we knew what we were doing till we actually bought the house then we realised we had no idea!!
 
Last edited:
Hi Scott and Bondy,

The low-value pool is between $300 to $1,000 (excluding GST credits). Keep in mind the low-value pool is not only for actual cost items, but also for low-value assets which have an adjustable value for the financial year between $300 to $1,000 (i.e. during the time the asset is depreciated, falls within the range noted above)!

Items costing $300 or less is an immediate deduction (woohoo!).

Repairs can be deductible. It just needs to be due to the normal wear and tear or damage from renting the property!

Constructivity
www.constructivity.com.au
Tax Depreciation Schedules - Sinking Fund Forecasts - Insurance Valuations
 

Sim

Administrator
We are about to settle on our first IP. It is pretty much right to rent it out straight away, however we have since found out that the dishwasher is broken and is only fit for the rubbish bin. How soon after the purchase can we buy a dishwasher and claim the cost on tax? I have been told 3 months and 12 months by different people.
Also does someone have to be actually renting it at the time to be able to claim?

The ATO does not specify exactly when you can start claiming repairs - as previously mentioned, if you can justify the repairs as fixing up normal wear-and-tear which primarily occurred after the property settled, then you can claim them and don't have to depreciate them as improvements.

Anything which was already damaged/worn at the time of purchase is considered to be bought "as is" (ie the price you paid for the property took that damage into account) and fixing it right after settlement would probably constitute an improvement. It gets a bit grey as to when it is no longer an improvement - speak to your accountant about that.

Remember that replacing anything at all is considered a capital expense (eg replacing a damaged fence), as opposed to repairing it (eg repairing just the damage to the fence, not replacing it all). Replacing a dishwasher is an improvement (capital expense), repairing it is a repair (obviously).

The property only has to be "available for rent" for you to be able to claim costs/depreciation - it doesn't have to be physically tenanted at the time. This means that provided you were actively seeking a tenant and someone could move in at any time (ie you weren't in the middle of renovations or something - and you weren't living in it yourself!), then you can claim costs.

As previously mentioned - these are all things you should talk to your accountant/tax expert about for advice!
 
Even your tax man won't give you what sounds like a 'straight' answer on this question! It sounds like you just bought your property so it will be difficult to consider anything as repair as a result of normal use or wear & tear. Get a few years behind you and you will be able to make many claims for repairs, perhaps too many.:eek:

You are at the stage where you can repair a fence but you can't build a new one. Five years on you may be able to claim replacing the whole fence as a repair. Painting a property in the first year is not a tax deduction but after a few years it becomes expected maintenance.:confused:

Don't avoid fixing things up just because they are not tax deductible because you are improving you asset. Just keep meticulous records because you may, some day, want to use these records to reduce the capital gains tax you have to pay.:mad:
 

Sim

Administrator
You are at the stage where you can repair a fence but you can't build a new one.

If the fence was already damaged when you bought the property, repairs are likely going to need to be added to the cost base of the property - check with your accountant!

Five years on you may be able to claim replacing the whole fence as a repair.

You can never claim replacing the whole fence as a repair - that will always be considered an improvement and must be depreciated over the life of the fence.

Painting a property in the first year is not a tax deduction but after a few years it becomes expected maintenance.

Doing some touch-up painting to repair damage on the wall in the first year (assuming the damage occurred after you bought it) should be fine as a deduction, but painting the whole room would be considered an improvement (unless perhaps the whole room was damaged as a result of vandalism or an enthusiastic kid). Whether an improvement would be depreciable or added to the cost base would be a question probably best left to your accountant!
 
Thats what I mean about a 'straight' answer, this concept is always mired in a shroud of ifs, ands & buts!

Your right Sim, go see an accountant, but a person has to also think for himself.
 
Top