renovations - deducations, timings, rent

[tb007]

Hi,

I have had a unit in West Ryde, NSW since 2002. I estimate it was not new when I bought it. It is a well maintained block with security access.

My tenants will be moving out in a couple of weeks and I would like to do some renos - mainly new kitchen(very old), new doors and painting.

The benefit I am anticipating is the tax deduction and the increase in rent.

I would appreciate the collective wisdom of this group:

1. Could you please tell me timings - OK to have the work done while the property is between tenants?
2. Anything I need to know about (I don't know what I don't know!).
3. ANY Lessons from your past mistakes
4.Anything I should do before they leave and before renos start
Thanks

 

[depreciator]

If you have owned the place and been renting it out since 2002, there is a good chance much of what you do can be claimed as repairs i.e. 100% deduction. Take detailed 'before' photos and keep all your receipts.

 

[susan_10]

You need to separate what is renovation and what is repair. If repairing or replacing a damaged door you can claim outright. But if you are updating, that is considered capital improvement. I thought there is a maximum amount that you can claim as repairs and maintenance, it's $3K/yr check with your accountant as I am not sure about this. Capital improvement you should be able to claim against CGT when you sell the property. Be sure to keep receipts.

And you may at the same time get a depreciation survey if you have not done it yet specially after the renovation.

 

[vaughan]

Hi,

I have had a unit in West Ryde, NSW since 2002. I estimate it was not new when I bought it. It is a well maintained block with security access.

My tenants will be moving out in a couple of weeks and I would like to do some renos - mainly new kitchen(very old), new doors and painting.

The benefit I am anticipating is the tax deduction and the increase in rent.

I would appreciate the collective wisdom of this group:

1. Could you please tell me timings - OK to have the work done while the property is between tenants?
2. Anything I need to know about (I don't know what I don't know!).
3. ANY Lessons from your past mistakes
4.Anything I should do before they leave and before renos start
Thanks

A new kitchen is capital works, not repairs, so it is not an immediate deduction. Instead, it can be depreciated. Other aspects of the renovation like floor polishing or painting walls can be considered repairs and will be immediately deductible.

If you get a loan to do the renovations, the interest can be a tax deduction.

Before you do the reno, ask your property manager to take a look and advise whether the work will improve the rent, and get an estimate of what the improved rent might be. From that work out whether it is worth doing the reno. (Spending $10,000 to get an extra $20 a week is probably not worth the effort.)

 

[wylie]

And you may at the same time get a depreciation survey if you have not done it yet specially after the renovation.

If you've just completed a renovation, you already have the figures and expenses that you can depreciate.

Last place we bought was so old and "original" there was nothing of value to depreciate. We did call a depreciation expert who advised us to keep records of what we spend renovating (naturally) and these are used to form the cost base and to be depreciated.

Had the house not been so old, I guess it would have paid us to get a depreciation schedule.

This is something I've wondered about because everything we've ever bought has needed work immediately, and the stuff ripped out has had no value, so we've not bothered with paying for a schedule.

 

[tb007]

Thanks everyone for the responses.

Had a preliminary inspection this week. The kitchen lino needs to be replaced. Agent says I can only charge tenants for the areas that are damaged (rips and holes).

The place need s a freshening up with paint.

Agent think s we can achieve at least $50 more rent without kitchen.

With regard to depreciation report. If I have the receipts from any new work, do I still need an depreciation report?

 

[depreciator]

No, you're not going to need a Depreciation Schedule. Just give the receipts to your accountant and they will sort it out. As I said above, much of what you do your accountant will claim as repairs.

 

[marks]

Check on paint. Re-painting can be classed as a repair if it was during the time you were renting it (ie. during tenancy changes.)
But it is an improvement if done prior to renting out. ie you bought a place that needed painted before renting out.

 

[Alex2095]

hmmm my situation is similar....

recently bought, reno'd and rented out two IPs...

All renos to both properties where carried out prior to renting, so does this mean I cant claim any of these renos as repairs?

And since I have all the receipts for the renos because they were recent ( and I didn't lose them like I lose everything else) am I better of giving them to the accountant or get a depreciation schedule?

 

[depreciator]

All renos to both properties where carried out prior to renting, so does this mean I cant claim any of these renos as repairs?

Correct.

And since I have all the receipts for the renos because they were recent ( and I didn't lose them like I lose everything else) am I better of giving them to the accountant or get a depreciation schedule?

Your accountant could take care of it. The only reason you would need to get someone like us involved would be if there were renos by previous owners that needed to be costed or if you wanted some existing Assets valued.

Scott