Reno tax deductable on IP?
- Thread starter bazza52
- Start date
Improvements can be depreciated - pergola etc over 40 years at only 2.5%, sadly.
Scott,
For things like internal painting is there a bit of a grey area regarding repair vs improvement? I've got an IP in which two of the bedrooms have wall paper that has been knocked around a bit, and is peeling in places. I'm considering paying to get the paper removed and then repainting. I've had the IP for almost 4 years now, so my view is that it should be a deductible cost since I am repairing damage done by tenants, although some of the peeling is probably just due to old age (the paper has been on there a while I think). What's your take on this situation?
John.
For things like internal painting is there a bit of a grey area regarding repair vs improvement? I've got an IP in which two of the bedrooms have wall paper that has been knocked around a bit, and is peeling in places. I'm considering paying to get the paper removed and then repainting. I've had the IP for almost 4 years now, so my view is that it should be a deductible cost since I am repairing damage done by tenants, although some of the peeling is probably just due to old age (the paper has been on there a while I think). What's your take on this situation?
John.
Hi John,
Yep, painting can be tricky. Painting done before a property is tenanted, is an 'improvement'.
Painting after tenants have been in there may be a repair, but painting a whole house after, say, 6 months tenancy is pushing the boundary.
With the wallpaper thing, I suspect it's one of those things where you have to make a judgement call - the ATO wouldn't be of much help of you phoned them.
There is an ATO decision that many people don't know about - ID 2002/330. It related to ripping up daggy carpet and polishing floors. The ATO deemed this a repair' because there was 'no change to the character or functionality of the property'.
I'm thinking this is similar to taking off that wallpaper. I would claim it as a repair, and if questioned explained you did so because of one of their Interpretative Decisions. I find if you can provide a logical (and referenced reason) for something, the ATO will generally respond in a logical and reasoned way. This isn't advice, but it's what I would do in your situation.
Scott
Yep, painting can be tricky. Painting done before a property is tenanted, is an 'improvement'.
Painting after tenants have been in there may be a repair, but painting a whole house after, say, 6 months tenancy is pushing the boundary.
With the wallpaper thing, I suspect it's one of those things where you have to make a judgement call - the ATO wouldn't be of much help of you phoned them.
There is an ATO decision that many people don't know about - ID 2002/330. It related to ripping up daggy carpet and polishing floors. The ATO deemed this a repair' because there was 'no change to the character or functionality of the property'.
I'm thinking this is similar to taking off that wallpaper. I would claim it as a repair, and if questioned explained you did so because of one of their Interpretative Decisions. I find if you can provide a logical (and referenced reason) for something, the ATO will generally respond in a logical and reasoned way. This isn't advice, but it's what I would do in your situation.
Scott
Yep, big renos are 'improvements'. The building work will depreciate at 2.5%pa, any Assets (fixtures and fittings) you add will depreciate more quickly.
Keep all your costs and your accountant will be able to sort it out.
Scott
Keep all your costs and your accountant will be able to sort it out.
Scott
