Restumping a repair expense or capital improvement?

[dublin_101]

Hi.... Sorry to bother you all with probably a common question...

I am looking at purchasing a house which has potential to be a 3 unit site. The house is in urgent need to be restumped.

Now from searching the forum I believe that the cost of restumping is not tax deductible if it is considered an improvement.

However I do think I once read that if something is replaced like for like, eg a rotten timber stump being replaced with a new timber stump than that is considered a repair.

As I'd only want to keep the current house for a couple years before demolishing, I am curious to know if I could indeed do timber stump repairs as opposed to concrete stumps, and claim the repairs in the first year.

I welcome your thoughts.... Is this feasible or not?

 

[jrc]

No. It is an initial repair, so it firms part of your capital cost.

 

[dublin_101]

Thanks. At what point could it be considered a repair? After 1 year of owning it and renting it out?

 

[jrc]

If the house or part thereof had stumps in disrepair at the time of purchase, then those repairs would always be classed as initial repairs.

 

[datto]

If the house or part thereof had stumps in disrepair at the time of purchase, then those repairs would always be classed as initial repairs.

How would the ATO know that?

If you fixed the stumps (isolated piers) in 3 years time........repair

 

[dublin_101]

So I'm still curious if I could restump after one year and claim as a repair.

 

[Rob G.]

No it is not a repair.

Datto was merely indicating ways to try to hide the fact from the ATO.

 

[Paul@PFI]

A repair corrects damage. If a car hit the house it may be a repair to fix the stumping and re-situate the joists on the stumps.
If something deteriorates than it is capital expenditure.
If something breaks / stops operating and you replace only the broken part that is a repair. If it is repaired with substantially same items and materials it is likely a repair - eg replace a few cracked tiles. Replacing them all is capital.

Any expense incurred to correct defects evident at the time of acquisition is capital despite when the cost is finally initiated. eg : 1 day, 1 year or three years after acquisition.

A low value (<$300) capital expense may also be deductible outright.