Repair v capital improvement

Hi all...just some advice or thoughts please. We have two IPs in the same high rise building down the Gold Coast and we are being made to replace all the windows in the unit. I should say its not just us the whole building windows and balcony doors are being replaced on engineers advice due to corrosion and by their report as being unsafe.

Some are common property and covered by body corp but balcony doors are the owners responsibility.

The expense is significant and i'm trying to establish if this will be a capital improvement or a tax deductible repair....by my thinking it is a repair/replacement and we should be able to claim as a tax deduction.

Any thoughts people
 
Depends largely on how long you have owned the apartments for. If the corrosion was present when you bought, replacing the doors will be an improvement. If you have owned the apartments for a fair while, an been renting them out, the damage could have occurred during that period and you might be able to claim the work as a repair. What is the cost?
 
Possibly borderline, but worth pursuing - much better to claim that $20K immediately as opposed to claiming it at the rate of 2.5% over 40 years.
A $20K repair claim on your tax return could raise questions from the ATO. Time for a Private Ruling, I reckon. It's easy. You download the form, fill it in, and fax it off. Then somebody will possibly call you to have a chat before you get your Ruling.
Mention that when you bought the flats there was no corrosion apparent. It would be great if you could could back this up with reference to a building report or strata report.
Mention also that the location of the building makes it especially susceptible to corrosion.
State that the replacement windows will be 'like for like' and that the same openings and fixing points will be used i.e. the building is not being 'improved'.
Scott
 
Might be worth checking that the balcony doors are definitely your responsibility and not strata.

If not clearly identifiable on the strata plan, then look at whether strata have a history of undertaken (and therefore taking on responsibility for) any repairs or replacement of previous balcony doors.
 
I would suggest its capital expenditure as these items are part of the building. Replacing isn't repairing. Grinding rust and repaint is characteristic of a repair. A repair is fixing the glass in a window or two. Replacing the window is a replacement. The greater project involves whole of building and more than just your property. I'm going to suggest that the repair is just ordinary age deterioration combined with climate and sea spray. Lets face it - You have probably been depreciating the items so far. Now you also want to write off the residual value and claim a deduction ???

When its all done also might be worth having the QS report updated for special levies used to do common areas too.

I agree with depreciator that unless a private ruling you run a big risk. The ruling would remain subject to the usual "full and complete disclosure" issue...So just cause you get a favourable ruling doesn't mean its a certainty. Its only as good as your information to the ATO.

The special levies for the strata aren't deductible either....Again a broader ruling may be needed that covers both common strata and owners property. This may be issue the strata should engage a QS tax specialist to assist with.
 
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