Repair to IP

Discussion in 'Property Management' started by vtt, 15th Jun, 2015.

  1. vtt

    vtt Member

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    Hi all,

    The tenants will be moving out of our IP when the lease expires at the very end of June. Back at the beginning of May (before tenants gave notice) I learned that part of the guttering had been damaged in a storm and needed repair. I asked the PM to arrange a quote for repair, which she did. This came in at the second week of May. I said to her to go ahead with the quote and asked her to please organise the work to be done before the tenant moved out (they had just given notice). The tenant asked for it to be done after 14 June as they were going to likely move out a bit earlier and didn't want to have to deal with trades while they were still there trying to move.

    I said to the PM that was fine as long as the work was done before the end of the lease. After the end of the lease we are intending to renovate the property and then move in as our PPOR.

    Anyway I hear nothing from the PM and two weeks ago I email her to find out where this is up to and what date they are coming. I had no response so emailed again last week, only to receive an email response from the owner of the R/E Agency saying the PM is on holidays and she knows nothing about this work.

    So I call the guttering company directly and find out the work has been booked - but for end of July, not June. Tenants will be well and truly gone by then. The guttering company can't fit this job in before end of June as they are now fully booked.

    Would this guttering repair have been claimable as a deduction, and if so do I have any right of recourse against the agent for not organizing it as per my instructions?

    Thank you
    vtt
     
  2. Terry_w

    Terry_w Member

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    It is possible that it could go either way - repair or improvement depend on what you do.

    Why do you think it won't be deductible in July? Or did you want to bring the deduction forward to this financial year?
     
  3. vtt

    vtt Member

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    Hi Terry

    The tenant is due to move out at the end of June and after a renovation it will become our PPOR - I'm assuming the repair won't be deductible once the tenant has moved out, or is that not correct?

    We aren't replacing the guttering, it is a repair to one section including some re-sealing around where the gutter meets the downpipe- I assume that is repair and not an improvement?

    Thank you
    vtt
     
  4. Terry_w

    Terry_w Member

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    Once you move out the repair won't be deductible unless in the same financial year.

    But if you are putting up a better gutter and down pipe it may not be a repair but an improvement. If it is of the same quality and make it would probably be a repair.

    Your agent not following your instructions has possibly caused you to suffer a loss. But you didn't give them much time to do this...
     
  5. vtt

    vtt Member

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    Hi Terry,

    How much notice is enough notice? We asked them in second week of May to get the work done before end of June. That is 6 weeks. Is that not enough time?

    The guttering is being repaired like for like, no improvement. It is only a small section (about 30cm) that is affected.

    Thank you
    vtt
     
  6. wylie

    wylie Member

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    Is trying to claim the cost of a 30cm section worth worrying about? If you wait until you live there you lose a few dollars in deductions but the upside is that you can ensure it is done properly.
     
  7. depreciator

    depreciator Member

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    If the damage occurred while you were renting the place out (and you have a paper/electronic trail to prove this, you will be able to claim the cost of repairing it as a deduction even if the property is no longer an IP.

    I'm not sure whether the fact that it happens in a different financial year matters, but Terry knows more about this stuff than I do.
     
  8. Terry_w

    Terry_w Member

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    That is for you to decide initially.

    How much is this going to cost and is it worth the bother?

    See TR 97/23
     
  9. Rhinsor

    Rhinsor I'm Batman

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    30cm? I had about 10 meters of guttering replaced like for like which included repairing all split joins around the whole house for $600.

    What is wrong with the guttering can you not wait until you move in and fix it yourself?

    Gutter people won't want to do this unless they fit it in between a small gap they have. Winter time they are always booked out.
     
  10. vtt

    vtt Member

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    Thank you. Clearly we are using different guttering people as this job is $470, and for a much smaller section than yours! Yes of course we can fix the guttering when we move in (which we will) but my question relates to the deduction.

    I know it's semantics but I would expect that 6 weeks to organise a guttering repair is enough time. The way we found out that it had been booked for July and not June was when I called the guttering provider myself after hearing nothing from the PM.

    The damage occurred during the term of the tenancy when the section of the gutter was damaged in a storm after a tree branch fell on it and damaged that section. We have a paper trail as the tenant raised it to the PM and the neighbour also alerted us to it (we were at the property for an inspection, tenants were not present at the time) and at the time I emailed the PM. The tenant complaint and neighbour conversation happened on the same day.

    Maybe $470 is not a lot of money to some people but whether it's $470 or $4,700 shouldn't matter, a deduction is a deduction and small things add up.

    Anyway thanks all for your help.
    vtt
     
  11. DaveM

    DaveM KFC Buyers Agent

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    Damage happened during the time it was income generating so should be deductible even if repaired after it ceases to be income producing.

    If its a repair to 30cm then its likely an immediate writeoff.
     
  12. Terry_w

    Terry_w Member

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    Can u cite anything to support this view Dave? Master Tax Guides refers to it being only deductible in the same income year after the rent ceases. You would think that it would be deductible but claiming an expense with no income would stand out.
     
  13. DaveM

    DaveM KFC Buyers Agent

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    I am not a tax expert so I cannot speak to tax law.

    But for a 30cm repair its a small job that a handyman/multi trade could likely do. I would get another company to do the repair rather than wait till July. Would make sense and doesnt mean over-complicating it