Repairs & Maintenance VS Capital Expenditure

[alex9050]

Hey guys,

I was speaking with my accountant today and was discussing repairs and maintenance versus capital expenditure. As I'm just starting out in the property game, the more I can deduct in my first year the better. My strategy is to buy a run down house and do a small to medium cosmetic renovation, bringing up to median value and then renting it out - creating equity and a neutral-positive cash flow. Then repeating this.


To maximise my deductions in my first year, I need to make sure my renovation is classed mostly under 'repairs and maintenance' as apposed to capital works. Here's what I took away from the meeting with my accountant today;

If I am to replace the old, worn carpet with new carpet, this is classed as a repair and that is good for me.

If I am to replace the old kitchen bench with something more modern, that is classed as a repair.

BUT

If I was to replace the kitchens benchtops, cupboards and flooring - this is classed as a capital expenditure.



My question is, where does the ATO draw the line? Benchtops and cupboards only? Benchtops and floors? Floors only? How can you tell when you are 'safe' in claiming the renovations as repairs? Any little tricks of the trade I should know about in terms of this?

Thanks a lot

 

[Propertunity]

If you buy a older place in need of repairs then NOTHING you do will be a repair with an immediate write off. The property has to be rented out for a 'reasonable' period first and even then if the repair was needed when you purchased the property, and you just delayed doing it, then you still don't get to write it all off as a repair.

 

[wobbycarly]

If you buy a older place in need of repairs then NOTHING you do will be a repair with an immediate write off. The property has to be rented out for a 'reasonable' period first and even then if the repair was needed when you purchased the property, and you just delayed doing it, then you still don't get to write it all off as a repair.

What he said!

Maybe you need a new accountant, too...