Making IP pretty before moving in!

[Nards]

Hi all,

Well the sad day has come where we have to move out of our company-provided house and into one of our IPs (OMG - will have to pay utilities again!) It was out PPOR a few years ago, and we had hoped, when the time came, to move into a bigger and better house, but it is not to be!

So the tenants are packing their bags and so are we. We want to do some cosmetic work before we move back in, such as replace carpets and paint etc and want to do it in the most tax efficient way possible .

Does anyone know what the tax implications of doing cosmetic repairs (to account for fair wear and tear over the years of being rented) before it becomes out PPOR? Can we claim some of the expenses as IP related expense, and is there a time frame?

Thanks in advance
Nadia

 

[ezza]

You have until the end of the financial year in which the house ceased being used for income producing purposes to do repairs.

http://www.ato.gov.au/content/downloads/IND00133187n17290608.pdf

Page 12, Example 12.

 

[Nards]

Thanks heaps Ezza, much appreciated!

Nadia

 

[wishing_well0]

Nardia,

I would be cautious and check with your accountant. My understanding is that if you replace the carpet - all of the carpet in the house it is no longer considered a repair but rather an improvement and then it becomes a capital expense.

Same for the painting - if you paint one room, considered a repair but the whole house = improvement.

I have been pulled up on this before which is why I suggest you check.
Good luck.

 

[Nards]

Thanks WW,

I suspect that would be the case. As you say it would not be a repair. But I will check with the acct before going ahead.

Cheers,
Nadia

 

[wishing_well0]

Hey, I was thinking about this more this morning and I think that the painting is ok but the carpet is definately an improvement if all done at the same time.
I am sure that if you chat to your accountant and then have a think about it you will find a way that suits your end goal.

 

[Ana]

Hmm. Some of it also depends on how you describe it. It pays to be specific.

So if for example you explain that you are replacing an airconditioner that has broken down - that would be fine, but if you just said you were buying an airconditioner than it would not be ok to claim the full amount.

Wishing you every success,

Ana