Repairs vs Dep Assets vs Capital Works Deductions

[AndrewWerth]

Hi

I had to have the main circuit board replaced in my IP's pool chlorinator. It simply restored the efficient operation of the unit.

Is it a repair or a depreciable asset? pg 33 of this pdf 'Rental properties
2011' has it listed as a separate row item with a effective life.

http://www.ato.gov.au/content/downloads/IND00270214N17290611.pdf

Also a clothesline was installed to replace the existing one with rusted support poles and sagging line. Is a clothesline only claimable as a capital workds deduction?

 

[BuildingBlocks]

You may be able to put those in the low value pool:

http://www.ato.gov.au/individuals/content.aspx?doc=/content/00216830.htm

The clothesline is not a repair, you have replaced the unit and significantly increased the expected life. Not sure about the circuit board, if it is a single part then it may be OK.

 

[depreciator]

Low Value Pool is for Assets, not Capital Works items.

The ATO regard clotheslines as Capital Works i.e. 2.5%

You would probably be fine claiming the other things as a repair.

 

[AndrewWerth]

Hi guys

Clothesline

1 - what if it was not a full replacement but just a new pole to replace one out of 2 poles.
2 - Initially i thought the clothesline would be considered plant or an asset as it has a 'separate visual identity' but I suppose the other criteria (pg 25 of above linked pdf) such as

'extent to which it was intended to be permanent'= indefinitely permanent..
'the incompleteness of the structure without it' = houses are generally assumed to have a clothesline

outweigh its separate identity making it a capital works deduction at only 2.5%

Circuit board for Pool Chlorinator

It is a single part but as mentioned above I also find it listed on pg 33 of pdf 'Rental properties 2011' has it listed as a separate row item with a effective life. Therefore a chlorinator is considered a single unit which in tandem makes up the pool equipment. However I am talking about a part inside the unit, the circuit board does not comprise the unit as a whole so surely this pushes the 'repair' option?

If i have to concede its an asset, then at $600 cost, I assume I can put it straight in the low value pool at 18.5% (1st income year added) rather than use the 12 year effective life?

3rd question - Service work on pool equipment

A basic service, $285, was carried out on all the pool equipment to ensure its workability - does this fall under maintenance and therefore 'repairs'. I note some of these parts required items like small seals to prevent leaks therefore in a way the work was also fixing the early stages of existing deterioration.

 

[depreciator]

Replacing some bits of a clotheline = repair/maintenance.

If the circuit board is part of the chlorinator and you are only replacing this bit = repair/maintenance.

Servicing the pool stuuf = repair/maintenance.


Of course, the above is assuming that the problems arose while the property was rented out.

 

[AndrewWerth]

Hi depreciator

My current accountant seems to think I have to put the chlorinator in as a depreciable plant/asset item, our difference must be because he thinks the chorinator is entirely made up of the circuit board.

What about roof insulation batts? Capital Works deduction at 2.5% ? i was told it may not even be a deduction but have to become part of the cost base. ie. I get no tax benefit until X years in the future when I sell it.

I assume then, its very important to critical, what the invoice from the tradesman,supplier says? ie. the wording

'Replace in full' vs 'replace part of or replace section of, repair' etc.