Repair or improvement?

[Starting out]

Hi Guys,
We have an IP purchased 3 months ago and it seems the oven needs to be replaced. Teneants say it continues to lose heat, we have had an electrician inspect it, and found nothing wrong.
If we replaced the whole thing, is this a repair or improvement for tax reasons? (so it can be done before end of financial year)
Many thanks

 

[Aceyducey]

Starting out,

If you replace it it isn't a repair

Cheers,

Aceyducey

 

[Les]

G'day SA, and AD,

Acey ducey says If you replace it it isn't a repair - and I agree............

But, as a depreciable item, any outstanding value on the OLD stove would be immediately deductible, AND the value of the new stove is depreciable over the next 5 years .... (I think... )

Dunno about anyone else, but this area is always a "fun" area !! Yes, if you buy a house with a crook stove, then the replacement is "Capital" (i.e. if you'd paid a bit more, you'd have gotten a house with a better stove - Oh, really? how is this proved??).

But, the good bit is that even Capital expenses can be borrowed, and Interest on those borrowings ARE deductible.

Also (unless I'm way off base) some items are depreciable from day one (stoves, carpet, water heaters, etc.). But DON'T try to claim a fence or carport at anything other than the usual Capital Allowance rate (2.5% pa).

So, I would say "replace the thing anyway" - your accountant will sort out any important bits. Also, what if you DIDN'T??? Would the tenant stay and "put up with" an inferior property?

And, no, I am NOT qualified to give advice - the above is simply my opinion - I could be wrong, so do check it out with your adviser..

Regards,

 

[siacci]

I would claim it as a repiar and depreciate as a single item the tax offices schedule for Ovens. If the item is defective when you purchase then capital, but it has become defective after you purchased so it would go on my books as a repair. Also the theme of tennants livability (probably not a word but....) comes into the picture. In Victoria if you do not fix this oven and the tennant involves the tribunal, then the socialistic tribunal will more often find in the tennants favour on these types of problems and can also make you pay extra for the tennants distress (sounds ridiculous but so is the law). Had a similar problem with air conditioner once.

 

[Aceyducey]

siacci,

if you repair it it's a repair - if you replace it, it's a replace

Les is correct on depreciation.

Always worth looking for factory seconds, better value than new & not as many issues with them as second-hand.

Cheers,

Aceyducey

 

[gecho1]

have to agree with Les and Aceyducey on this one.
We had a bund stove at a house my wife and I used to rent.
Had the electricians out 5 times to fix that bloody thing. Sparky will set you back at least $75 just for the call out and first 1/2 hour (in our case the first three times he didn't have the part so bill was closer to $150) X 5 callouts = cost of brand new stove!


Gecho