Renovation Kitchen, Interest & Depreciation

[rabidz]

Hi all,

Say I had an IP for about 2 years.
I'm about to renovate completely the kitchen, and it's going to cost me $10,000.

Questions?
1. If I borrow this $10,000 from my separate LOC, is the interest of this loan is tax-deductible? (say if I paid out this $10,000 in 15 years, then the interest for this loan is tax-deductible for these 15 years)?

2. Since it's an improvement (rather than repair), so I cannot claim this expense immediately. So I have to put this expense into depreciation schedule (update the depreciation schedule). Is this correct?

Thanks.

 

[D.T.]

Yes and yes

 

[HD_ACE]

Dont forget to claim the scrapping value if any.

Cheers

 

[syba]

In relation to the depreciation schedule, all the cupboards, etc would write off at 2.5% and the appliances at a higher depreciation rate.

 

[Paul@PFI]

+ Borrowing costs written off for term of the extra loan or 60 months whichever is shorter.

Its probably worth getting schedule updated. Identify obsoltete items for upfront deduction and then identify the items that can be depreciated at higher rates. Balance as 2.5% pa as capital allowance.

Try to get a detailed construction schedule and costs. Not uncommon to find a whole of job price and poor specs that dont mention all elements. eg : Just described the whitegoods not "cost". Thus revisit the QS report and get update. In my experience usually not a significant cost from same provider.

 

[depreciator]

Thus revisit the QS report and get update. In my experience usually not a significant cost from same provider.

No cost at all from us. Updating a Dep Schedule is pretty simple.

 

[rabidz]

Thanks for all the information.

I've another question.
Bought an IP in around 6-7 months ago.
This week, the tenant advised that there is water leakage in the bathroom (a little bit of the floor area are wet). Some hall-way carpet area are affected too --> wet. So, this thing needed to be fixed (maybe it's going to cost around 1000-2000, not sure yet).

I'm not sure whether this can be categories as "repair" or "maintenance", since the property just been bought 6-7 months ago.
When purchased, I organised the building inspection, but it's all good (around 1970's building).

My question:
1. Can I assume this as a repair? (so I can deduct the cost immediately for my tax return), or
2. Is this a maintenance? (so the only thing I can claim the cost is via depreciation)?

Can someone please help/advise?
Thanks. Much appreciated.

 

[depreciator]

Repairs and maintenance are treated the same way. They are both costs to deal with damage or deterioration that has happened while you have been renting out a place.
Improvements, or making the place better than it was when you bought it, are claimed over time.
If a building report said everything was fine and the water problem has happened since you have owned the place and been renting it out, I reckon your accountant will let you claim the cost of dealing with it as an expense.