Initial repair within 12 month rule

[ritchie77]

I have been looking into the initial repair rule and ATO ruling and would like others thoughts on the following recent IP purchase and whether these repairs/maintenance would be deductible:

1. Initial repairs and maintenance prior to tenangt moving in including cleaning, doors, windows, etc. (circa $500)

2. Repairs carried out once tenant moved in to post/structure at rear (<$100)

3. Replaced aerial due to tenant complaint after 6 months ($200)

4. Replace damaged clothes line after 6 months ($275)

5. Other general repairs for plumbing (broken tap) and door (damaged by tenant) within the first 12 months of purchase (both minor $100-200)

6. Other minor costs for door stoppers, screws, putty, misc etc (these receipts are all $3 or $4 throughout the first 12 months)

Any thoughts on deductibility of these? I would propose 2 - 6 should be allowable for immediate deduction as they were made after the tenant moved in and below $300.

I just want to ensure this is in line with ATO standards and it does not set off any 'alarm bells' for claiming repairs in the first 12 months - initial estimates is it will be approximately $1,000 for the first year of ownership. The majority of these were general wear and tear and not increasing the value of the property when purchased as outlined in the 12 month rule.

Look forward to the feedback.

Thanks
Rich

 

[Rob G.]

Its not when the repairs were carried out.

An initial repair relates to a defect that existed when you acquired the asset.

Delaying the "repair" until the tenant moves in does not change its nature.

Repair of damage caused by YOUR tenants (and not the previous owner's tenants) would not fall into this category.

Cheers,

Rob

 

[chilliblue]

Email in part from my accountant with regards to similar situation


"You will need to take care when doing repairs etc immediately after purchasing the property as the ATO may view these are as part of the initial purchase cost and therefore cannot be claimed until you sell the property (capital improvements), ie the price of the property has been reduced because some repairs need to be carried out.

It is best to keep repairs to a minimum for about the first six months or so."

Of course this relates to my situation and my new purchase so you should seek your own independent advise.

Hope this helps.

 

[Terryw]

I've never heard of the "Initial repair within 12 month rule".

If its broken I fix it. If you replace an item with a better item then it would likely be an improvement and thereby only claimable via depreciating the item.

 

[ritchie77]

Thanks guys - 3 to 6 are deductible (IMO) as they were caused by tenant and are also after 6 months or so (even though timing may be irrelevant it shows the tenant has been in and therefore damage/repair required - ie wear and tear).

No. 2 is likely an improvement and will need to be depreciated.

No. 1 are initial repairs and therefore likely undeductible and capital based. I note in no. 1 there are a number of minor costs such as door bell, door stopper, window locks etc - would these minor ones be duductible in youropinion? Note some of these are only $3 - $15 etc.

Thanks
RIch