repair or improvement - new investor

[onion33]

I'm buying my first property. It hasn't settled yet. If I get an agent to list the property for rent saying "available in a month 1st aug".

Question 1 - can I only deduct expenses purchased after 1st Aug?

Question 2 - id like to change the light fittings, ceiling fans, door handles, front door etc. Are these repairs or improvements?

Thanks

 

[ww2_nut]

Improvements

 

[Paul@PFI]

These are generally initial repairs, not improvements. Initial repairs are capital expenditure and non-deductible. The rationale behind this is that you acquired the property in a specific state and paid a price for that. If it had all the improvements done it may have cost more. Thus the initial reapirs approach reflects that view.

This ATO guide is a good reading source for new IP owners.

 

[onion33]

Thanks.

Can you help with question 1?

 

[superAndrew]

Regarding questions one:

The date you should use is the date the property is available for rent and you intent to rent it out.

Andrew

 

[onion33]

So that means anything I buy for the property before Aug 1 (the day it's available for rent) ISNT tax deductible?

Thanks.

 

[Paul@PFI]

Not really. It depends is my response.

 

[marg4000]

So that means anything I buy for the property before Aug 1 (the day it's available for rent) ISNT tax deductible?

Thanks.

In a nutshell, you purchase a property in a specific condition. Anything you do or buy to improve that is capital expenditure.

So no, anything you spend before the property is rented is not tax deductible, but may be included in the base cost when calculating CGT.

Repairs are only tax deductible IF the property is tenanted and work is required to return the property to the condition it was in when first rented out.

Marg

 

[Paul@PFI]

The minimum expenditure threshold of capital improvements should be considered.

This is an area where there is overlap with a QS report. If you install a $200 exhaust fan the QS would likely write it off...Hence it becomes deductible.

My advice would be obtaining a QS report AFTER work is done and identify the cost of what you did and they will consider what can be written off or depreciate etc.